Class action communications: are you ready?
New data highlights a growing tide of class action litigation in the UK. Whichever side of a class action you’re on, effective communication is vital to get audiences on side – from the public to media, regulators, and politicians. Shreena Patel, Associate Director at Bladonmore, explains.
Research released by Thomson Reuters in 2022 found that the number of class actions targeting FTSE-100 companies globally had increased by more than 10% over the last year, from 155 to 170.
Class actions (‘collective proceedings’ under the UK regime) allow claimants to come together en masse to bring the same or similar claims against those they believe are responsible for wrongdoing. They are intended to enable collective redress where it is practically and financially unviable to pursue claims individually.
While they are a well-established part of the US legal landscape, their use in the UK to date has been much more limited. However, that is now changing – especially within the realm of competition law.
Popular destination for competition-related class actions
New data from Thomson Reuters shows that the value of UK class actions launched against companies for breaches of competition law has leapt more than six-fold in the past year. Eight class action cases worth £26 billion were filed with the UK’s Competition Appeal Tribunal in 2022, compared with six worth £4 billion in 2021.
Financial institutions and big tech are notable targets, with Apple, Google and Sony among the companies that have had claims filed against them.
But what’s behind this trend?
Legal reforms changed litigation landscape
Most of the options available in England and Wales for class actions operate on an ‘opt-in’ basis. But in 2015, the Consumer Rights Act (CRA) introduced a new opt-out procedure for infringements of competition law. This removed a major hurdle for organisers of these claims: they could now sue on behalf of millions of potential claimants without their express mandate or knowledge unless they took proactive steps not to participate. In other words, it became much easier to reach the threshold for financial viability. Only three other jurisdictions in Europe offer opt-out class actions: Belgium, Portugal and the Netherlands.
To safeguard against a flood of frivolous lawsuits the CRA also contains certain checks, including a requirement for the UK’s Competition Appeal Tribunal (CAT) to certify cases as suitable to proceed. The CAT certified its first case in 2021 following a landmark judgement by the Supreme Court, which lowered the threshold for certification. Since then, the UK’s opt-out class action regime has started to gain traction. To date, 26 claims have been issued as proposed class actions in the CAT, and 11 of them certified.
Subsequent decisions have also widened the potential scope for certification. For example, later in 2021 the CAT certified the UK’s first ever ‘standalone’ collective competition claim (i.e., where no infringement decision has been made by a competition regulator).
Investors bankrolling class actions
As a result of the new opt-out procedure, pay-outs being sought in these class actions can run into the millions and even billions. Last year, online publishers filed a £13.6bn lawsuit against Google and its parent, Alphabet, over claims the firm abused its dominant position in online advertising, depriving website owners of revenue. This potential for huge rewards makes it attractive to fund claims, especially for investors seeking to diversify their portfolios (the odds of winning a case are not correlated to the stock market).
Research published in 2022 by City law firm RPC found that the 15 largest UK litigation funders had a record £2.2bn of assets on their balance sheets in 2020/21, an 11% increase on the previous year. The figure was £1.3bn in 2017/18 and just £198m in 2011/12.
The UK’s funding market is larger than the rest of Europe put together, according to a 2022 report by Brussels-based funder Deminor, although between them they are only a quarter of the size of the US’s.
The same report forecasts that the global funding market is likely to grow by 8.3% a year, reaching $18bn by 2025. ESG is expected to be a key driver of growth in the UK and continental Europe as shareholders, regulators and the public exercise greater scrutiny over what companies say and do in this area and regulatory requirements become stricter.
Trend only going one way
Right now, the opt-out procedure for class actions in the UK is limited to the competition sphere, but many view the regime as a ‘pilot’ for its use more widely. Developments will be watched closely by businesses, lawyers – and third-party funders.
Businesses should be alert, first and foremost to their responsibilities and standards of conduct. Given the increased risk of future litigation and the potential reputational and financial repercussions, they should also focus on building positive brand equity – and trust – through meaningful and regular engagement with their stakeholders.
Those that find themselves the target of a class action must be quick to develop clear messaging that strikes the right tone and resonates with different audiences. Consistency of narrative under pressure is crucial – across brand touchpoints and designated spokespeople. Finally, given the newsworthy size and scope of many of these claims, companies must also be prepared to deal with significant media interest and be ready to respond to new developments as the case evolves.
If you need advice around class action communications, get in touch.