Biggest overhaul of consumer rights in a generation the impact of the Consumer Rights Act 2015 on collective actions in the UK
As the government forges ahead with what it has described as the biggest overhaul of consumer rights in a generation, the Consumer Rights Act 2015 (the Act) received Royal Assent on 26 March 2015 and is expected to come into force on 1 October 2015. One of the most controversial aspects of the Act has been the introduction of opt out collective proceedings, a move which has been accused of heralding the beginning of a US style litigation culture in the UK. Nevertheless, the measures are likely to make it easier for SMEs, consumer watchdogs (on behalf of consumers) and trade associations (on behalf of their members) to take action against a company that has breached competition law. What do the new provisions mean for consumers? The new opt out collective proceedings regime will allow claims to brought by a defined group without having to identify all the individual claimants. These new claims will be heard by the Competition Appeal Tribunal (CAT). In addition, the Act will grant the Competition and Markets Authority (CMA) the power to approve voluntary redress schemes, under which companies found to have breached UK or EU competition law voluntarily agree to compensate those harmed by their actions. In less complex cases, SMEs will be given access to a new fast track procedure with the intention of increasing their ability to obtain redress for breaches of competition law.
The EU approach In June 2013, the European Commission published the non-binding Recommendation 3539/3, setting out several key principles which Member States have been asked to implement by 26 June 2015. Some of the provisions in the Act appear to conflict with those of the Commission Recommendation. In particular, the Commission Recommendation promotes the use of an opt in model, stating that opt out proceedings should be used as an exception and only where it is duly justified by reasons of sound administration of justice. In practice, the extent to which opt in proceedings become the exception as opposed to the rule once the Act comes into force remains to be seen. Comparisons with the US Despite fears that the UK is heading towards a US litigation culture, the Act contains a number of measures designed to safeguard against potential abuses. In order to bring collective proceedings, the CAT must make a collective proceedings order, specifying whether proceedings are to be brought on an opt in or opt out basis.
Unlike the US, the Tribunal cannot award damages in collective proceedings, and any unclaimed damages must be paid to a charity prescribed by order by the Lord Chancellor. Contingency fee arrangements will be prohibited in opt-out collective actions. Inevitably, these measures will significantly reduce the incentive for a claimant to bring an unmeritorious claim. New opportunities Consumer groups have welcomed the changes. The executive director of Which? described the Act as a firm foundation for empowering consumers and issued the following statement about the Act as a whole: The Consumer Rights Act brings consumer law into the 21st century… The Act is a firm foundation for empowering consumers and should make it easier for people to understand their rights and challenge bad practice. It will help boost consumer confidence if businesses embrace the new rules and make sure that they treat their customers fairly. In light of the fact that only one collective action has been brought by a consumer body since provisions were first introduction in 2002, the changes are long overdue. Whether they will be enough to overcome the current resistance to collective actions remains to be seen.
To view the Consumer Rights Act 2015 in full, visit: http://www.legislation.gov.uk/ukpga/2015/15/pdfs/ukpga_20150015_en.pdf
Jason Woodland is a Partner in the Commercial Litigation, Civil Fraud and Asset Recovery Department and can be contacted at email@example.com and 0207 822 7760.