Lawyers size up Cable's competition reforms as Government sets out new 'opt out' collective redress regime

The Government has unveiled a new 'opt out' collective redress system, described as "a quantum leap towards US-style class actions", as part of a series of wide-ranging competition law reforms following a consultation last year.

The measures, unveiled by business secretary Vince Cable last month, have received broad approval from senior lawyers,  after initial proposals were put forward for consultation by the Department for Business Innovation and Skills (BIS) in April last year.

The measures are being brought in as part of an effort to offer better protection for consumers and businesses against competition law infringements, with an opt-out collective action regime among the most eye-catching reforms.

However, collective action claims will only be allowed to be brought by claimants or representatives of the claimants, such as trade associations or consumer associations, and not by law firms, third-party funders or special purpose vehicles.

A number of other safeguards, including "strict judicial certification of cases", have been put in place to deter "frivolous or unmeritorious" claims, after concerns were raised that an opt-out regime could see companies face multibillion-pound claims brought by just one claimant.

Herbert Smith Freehills competition partner Kim Dietzel (pictured) commented: "The biggest change proposed is the introduction of a competition law opt-out class action, as well as an opt-out collective settlement regime. This would represent a quantum leap towards US-style class actions."

Norton Rose competition partner Peter Scott added: "The opt-out collective redress mechanism is the most eye-catching proposal, albeit with a series of safeguards designed to avoid the perceived excesses of the US class action system. 

"The critical question is whether these safeguards are sufficient to deter speculative claims but not so strict as to prevent legitimate claims from being brought in the first place."

Other key reforms include a plan to establish the Competition Appeal Tribunal (CAT) as a major venue for competition actions in the UK, with additional powers to hear standalone cases and issue injunctions, as well as a fast-track process for simpler cases.

The use of alternative dispute resolution will also be promoted as an alternative route to redress.

Freshfields Bruckhaus Deringer competition partner Mark Sansom said: "I think the Government has gone as far as anyone realistically expected it to go, and that it has been relatively bold in hanging on to the big ideas despite the concerns of the Confederation of British Industry and others about fostering an excessive litigation culture."

Baker & McKenzie competition partner Richard Pike added: "Our clients will be very disappointed to see that the Government intends to press ahead with an opt-out action that remains open to abuse by claimant lawyers and funders. It is no protection at all to limit claims to actual victims as that is just the same as in the US, where lawyers still drive the claims.

"Further, the proposal to require defendants to reimburse all loss supposedly caused even where little is actually claimed and then pay the rest to the Access to Justice Foundation is effectively just increasing the fines levied or imposing a new tax, conveniently reducing the burden on the legal aid budget."

Competition law overhaul – key reforms

• Establish Competition Appeal Tribunal as major venue for UK competition actions
• Introduce limited 'opt out' collective actions regime, with safeguards
• Promote alternative dispute resolution
• Ensure private actions complement public enforcement regime