After years of debate, the EU’s Collective Redress Directive is now in force from the implementation deadline of 25 June 2023. The Directive provides new consumer collective action rights and is likely to increase enforcement of consumer rights and actions across Europe.
The EU Collective Redress Directive
The Directive is applicable to a long list of consumer-focused EU legislation and will allow “qualified entities” (“QEs”) to bring domestic as well as cross-border representative actions on behalf of EU consumers. QEs are designated by Member States and will be subject to certain rules regarding independence and transparency. As a further safeguard, QEs will have to operate on a non-profit basis. Although the Directive permits third party funding, it also requires that such funding will not divert action “away from the protection of the collective interests of consumers”. This is a measure likely introduced to help prevent the extremes of the US-style class actions.
Interestingly, Member States may choose whether to allow opt-in or opt-out models although for cross-border cases (i.e. where the consumers affected by the relevant infringement do not reside in the Member State of the court where the action is brought), the opt-in mechanism must be provided for meaning consumers must explicitly express their wish to be presented in the action.
The Directive provides for injunctive measures (to enable QEs to seek an injunction to prevent unlawful activity from continuing or occurring) and redress measures (to enable QEs to seek remedies for harm suffered by consumers such as compensation, repair, replacement, price reduction, contract termination or reimbursement). However, the Directive does not permit punitive damages. This is another safeguard against abusive litigation.
What is the position in England and Wales?
There are several ways you can bring or manage mass actions in England and Wales although none are really specifically aimed at consumers seeking recourse against a trader’s breach of consumer legislation.
Historically, mass actions operated on an opt-in basis – taking advantage of options under the Civil Procedure Rules (“CPR”) which allowed for multiple claimants to bring a joint action or for the court to case-manage multiple claims together. However, such procedures are utilised more for court efficiencies than class representation.
The CPR does permit “representative actions” in a form comparable to an opt-out collective redress. However, such actions have several requirements including for the claimants to have the “same interest”. The Supreme Court recently held that these requirements are to be construed very narrowly, thereby restricting the potential for the CPR to develop a progressive opt-out mechanism.
A genuine opt-out mechanism does however exist in the Competition Appeal Tribunal (“CAT”). As its name implies, the CAT is mandated to hear cases regarding issues of competition law rather than consumer law. However, representative claimants have presented claims on behalf of consumer groups through the prism of competition law, thereby bringing, in effect, consumer collective redress. Though still in its respective infancy, the popularity of the CAT’s opt-out regime has increased – as has the associated market of third party funders, claim managers and lawyers. However, this mechanism to bring consumer collective redress remains limited in terms of breaches of consumer legislation, given there still needs to be a competition law nexus
Whilst there are some ways in which mass actions can be brought in England and Wales, as outlined above, it remains a difficult jurisdiction for collective redress.
Given the difficulties described above, there are calls to introduce a specific new collective redress regime for consumer protection cases under the UK’s proposed Digital Markets, Competition and Consumer Bill ("DMCC Bill"). If this were introduced, it would avoid the friction that can arise from bringing consumer actions within the constraints of a competition/antitrust infringement. If executed correctly, it should provide a more effective and better tailored means than currently available for groups of aggrieved consumers.
What does this all mean?
Consumer protection is top of the agenda both in the UK and EU. No only are there eye-watering new fines on the table for breaches of consumer law (under the proposed DMCC Bill in the UK and as introduced under the EU’s “Omnibus Directive”), but there are also new EU collective redress rights (and potentially more UK collective redress rights on the way) which are likely to intensify already increased enforcement of consumer rights.