Class Actions in the UK – Update

Published 4 May 2021

The increase in group litigation / collective actions in the UK has been exponential in recent years. Growth has been fuelled by the rapid expansion of the litigation funding market, awareness of access to justice and consumer protectionism, and successful media campaigns by claimant firms who target “wronged consumers” to build lucrative mass claims. Below is an update on recent class actions in the UK.

Infringements of competition law

The “opt-out” collective redress procedure introduced by the Consumer Rights Act 2015, available to claimants in “follow on” claims for damages for infringements of competition law, has been of limited use to date. Collective actions brought under this procedure must first be approved by the Competition Appeals Tribunal (CAT); it will only grant a collective proceedings order (CPO), allowing the case to continue where it is satisfied that the person purporting to act as class representative has permission to do so and the claims are “suitable” to be brought collectively. This criteria has created insurmountable hurdles for claimants at this initial stage and while a handful of actions have been commenced under the new procedure, none have so far been concluded.

All eyes have been on MasterCard v Merricks, which has highlighted the difficulties with the certification criteria. In a landmark decision of the Supreme Court in December 2020 (covered by us here), the Supreme Court significantly lowered the initial certification threshold that prospective claimants must overcome and remitted the case back to the CAT to determine whether a CPO should be granted, enabling it to advance.

Commentators predicted that the Supreme Court’s intervention to lower the threshold would pave the way for more large-scale follow-on competition claims and they were right. Shortly afterwards, in February 2021, the consumer group Which? launched a class action against the US tech giant, Qualcomm, and this is also now awaiting a CPO. This opt-out representative action, funded by Augusta Ventures and ATE insurance, claims that around 29 million 4G smartphone owners have been overcharged for their smartphones and could be entitled to a collective £480m pay out in damages from Qualcomm.

Which? alleges that Qualcomm breached competition law by taking advantage of its dominance in the patent-licensing and chipset markets and charging manufacturers like Apple and Samsung inflated fees and substantial royalties for separate technology licences. Which? argues these fees were passed on to consumers in the form of higher smartphone prices and it seeks damages for the owners of affected Apple and Samsung smartphones purchased since 1 October 2015.

Similar legal action has also been taken against Qualcomm in Canada and the US following court rulings of anti-competitive behaviour.

Data Breach

Class actions seeking compensation for the loss of personal data are increasingly common place in the UK. Heightened awareness of data protection rights (promoted by the GDPR launch), eye-watering fines imposed by regulators, and the reporting of significantly more data breaches have fuelled this trend. Class actions have recently been launched against Facebook and TikTok for loss of control of personal data.

The class action in the High Court against Facebook claims that the social media platform permitted a third-party app called “This Is Your Digital Life” (TIYDL) to access personal information of Facebook users without their knowledge or consent between November 2013 and May 2015. This personal data was subsequently supplied to Cambridge Analytica.

The UK Information Commissioner’s Office (ICO) described Facebook’s use of TIYDL as “a very serious data incident” affecting up to 87 million users globally. In 2018, the ICO issued the maximum penalty of £500,000 to Facebook for serious breaches of data protection law.

The class representative, Peter Jukes (a journalist), is bringing the action on behalf of around one million affected Facebook users in England and Wales who allege Facebook failed to protect their personal data and who now seek compensation. If the claim succeeds, Facebook’s liability could run into billions of GBP.

The High Court action against TikTok is brought by a representative on behalf of all other children under the age of 16 who are, or were, users of TikTok and/or Musical.ly. This class action alleges that TikTok processed the personal data in breach of the duties imposed by the GDPR and misused private information. The claim was issued prior to Brexit to secure certain procedural advantages and the court has granted permission to preserve the anonymity of the class representative.

Multinationals and complex supply chains

Corporate exposure for issues in supply chains such as poor working conditions, human rights abuses and environmental damage have become a fertile area for class actions in recent years. Increasingly of issue is whether parent companies based in the UK are liable for the activities of their overseas subsidiaries.

On 12 February 2021, the Supreme Court handed down its much-anticipated judgment in Okpabi and others v Royal Dutch Shell, allowing the claim against the multinational to continue. Okpabi is the latest in a series of cases, which include Vedanta v Lungowe [2019], in which the courts have considered applications by foreign litigants to bring claims against a UK-domiciled parent company in relation to the overseas activities of their foreign-based subsidiaries. The Supreme Court has suggested that the English Courts will be willing to assume jurisdiction over such disputes where there are concerns that the claimants may not be able to obtain justice in the foreign court or where the corporate structure suggests that the UK parent managed or supervised the foreign subsidiary.

Whether a parent company owes a duty of care to third parties affected by its overseas subsidiaries will be fact specific, but the Vedanta and Okpabi decisions will have significant implications for large multinational companies (and their liability insurers), particularly those operating in countries with poor working conditions or where abuse is more prevalent. With parent companies exposed to significant reputational damage, we expect more group litigation to be brought by foreign claimants against UK domiciled parent companies in the English courts and for early settlements to be favoured where possible.

Funding Arrangements

In DAF Trucks Deutschland GmbH v Road Haulage Association Limited and UK Trucks Claim Limited [2021] the Court of Appeal has ruled that litigation funding arrangements with funders who are not actively involved in the truck cartel collective actions but have agreed to take a fixed share of the damages award if the claimants are successful are not damages-based agreements (DBAs). This means the “follow-on” collective proceedings by Road Haulage Association Limited and UK Trucks Claim Limited against various truck manufacturers based on the European Commission truck cartel decision can continue under the litigation funding arrangements.

The decision is wind in the sails of the litigation funding industry and will give further impetus to large consumer group actions and competition claims. If the Court had held they were DBAs, then most litigation funding agreements currently in existence would have been deemed unenforceable and the funders would have been unwilling to continue funding these claims.

The Court of Appeal has given permission to leapfrog an appeal to the Supreme Court.

Conclusion

Consumers whose rights have been infringed by large corporations seem poised to be the first to inflict financial bruises on large multinationals through class-action style litigation. The increase in the number and size of collective actions in the UK is slowly aligning itself with the more litigious US class action culture. This trend is buttressed by the UK’s rapidly growing litigation funding market and niche (predominantly US-based) Claimant law firms that are always hungry to bring such actions.