In July 2009 the UK Government published its White Paper "A Better Deal for Consumers: Delivering Real Help Now and Change for the Future". The White Paper announced that a Consumer Advocate would be appointed in 2010. The Government is currently consulting on, among other things, equipping the Consumer Advocate with the power to take collective legal actions on behalf of consumers. Responses to the consultation are due on 5 March 2010.
Background
The ever expanding mass consumer market coupled with increased consumer activism and political interest has ensured that protection of consumers has become, and looks set to stay, a hot topic in Europe. Many European countries have introduced national laws providing, for the first time, a collective action for damages and many others are in the process of implementing or amending their collective action regimes. The UK is no exception.
In the UK, the Civil Justice Council (CJC) published in 2008 its report 'Improving Access to Justice through Collective Actions'1 . The CJC proposed "an opt-out generic collective redress regime" for England and Wales. The report called for a formal response from Government. The Government's response in July 20092, however, rejected the introduction of a generic right of collective action and instead proposed a sector-based approach to the introduction of collective action rights.
In the first instance, the UK Government considered the introduction of collective action rights in the financial services sector. Published in November 2009, the Financial Services Bill3 now includes proposals enabling a representative claimant to bring proceedings on behalf of a class of customers or other claimants and giving the UK financial services regulator new powers to impose redress schemes across the industry. The Government has now turned its attention to the protection of the consumer sector more broadly through a collective redress mechanism. The proposed approach differs from that adopted in the Financial Services Bill, with the introduction in 2010 of a representative, namely, the Consumer Advocate, who would be authorised to bring collective actions on behalf of consumers.
The Consumer Advocate
In July 2009 the UK Government published its White Paper "A Better Deal for Consumers: Delivering Real Help Now and Change for the Future"4 . The White Paper announced that a Consumer Advocate would be appointed in 2010 and committed the Government to consult on equipping that Consumer Advocate with some specific powers. Pursuant to this commitment, the UK's Department for Business Innovation and Skills ('BIS') has recently published a consultation paper on the proposed role and powers of the Consumer Advocate5 . The consultation paper suggests that the Consumer Advocate is "to work on behalf of consumers across Great Britain [acting] as a champion for all consumers, improving consumer advice and education and having the power, as a last resort, to take action against traders who have treated consumers unfairly by breaching consumer protection law".
Proposed scope of the Consumer Advocate's collective action powers
The UK proposals in relation to the Consumer Advocate adopt a conservative, non US style, approach to collective action. Pursuant to the consultation paper, it is proposed:
- that no collective claim will be permitted to proceed unless it is certified by the court as suitable to proceed as such;
- that the collective action power will be a 'follow on' power, that is to say it can only be used where the claim for compensation relates either to similar or the same facts to a proven breach of consumer protection law and that, in that regard, the scope of the Consumer Advocate's collective action powers will be defined in two ways:
- by setting out a list of legislation which could, if found to be breached following public enforcement action, enable the Consumer Advocate to take 'follow-on' collective action; and
- by listing certain alternative types of public enforcement activity related to this legislation that (in addition to enforcement under the legislation itself, where available) would be significant enough to enable a 'follow-on' collective action e.g. an Enforcement Order under the Enterprise Act.
- that the Consumer Advocate will adopt a "pre-damages opt-in" model. This is described as being a model under which any action by the Consumer Advocate would be brought initially in terms of a defined group with a minimum number of identified members. Other potential members of the group could then opt-in at any time before the damages were quantified.
Comment
It is too early to say how consumer collective action will work in the UK but the development does seem likely to stimulate some claims, even though the proposed structure is a far cry from US style class action model. At the very least, it seems likely that claims which are not currently brought either on an individual basis or as a group action, may now be pursued. Specifically, the inertia both as a matter of procedure and funding, which currently exists in relation to group actions, may well be overcome by the role of the Consumer Advocate. In particular, the proposed structure will not expose individual claimants to costs risk.
It is possible too that the granting of powers to the Consumer Advocate may lead to an increase in regulatory scrutiny for business. The consultation paper suggests that the Consumer Advocate should consult relevant enforcers/regulators before taking any action itself and expressly seeks views on what measures might be put in place to encourage regulators and enforcers (as opposed to the Consumer Advocate) to use their powers to obtain compensation for consumers, for example, under the 2008 Regulatory Enforcement and Sanctions Act. This initiative would be against the backdrop of increasing focus on regulatory enforcement at a European level. For example, in the sphere of product safety, the Commission has put the spotlight on rigorous and consistent enforcement at national level; in January 2010 it published new guidelines for the management of the EU rapid alert system for all dangerous consumer products.6
In the light of the different approaches being adopted to collective action through-out the EU both at Member State and at sector levels (coupled with the possibility of increased regulatory action), anticipating or planning for the risks associated with collective actions is likely to be a continuing challenge for businesses. Recent experience in Italy demonstrates this: new legislation which regulates class action entered into force in Italy on 1 January 2010 and the first class action in Italian history has already been brought by a consumer organisation in which damages of approximately Euro 1 billion are sought.
Responses
The full Department for Business Innovation and Skills consultation paper can be found here: http://www.berr.gov.uk/consultations/page53813.html .
The Department for Business Innovation and Skills has requested any responses by 5 March 2010, details of how to respond are included in the consultation paper.
Footnotes
2 http://www.justice.gov.uk/publications/docs/government-response-cjc-collective-actions.pdf
3 http://services.parliament.uk/bills/2009-10/financialservices.html
4 http://www.berr.gov.uk/files/file52072.pdf
5 http://www.berr.gov.uk/files/file53816.pdf
6 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:022:0001:0064:EN:PDF
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