For our Cooley colleagues in the US, defending class actions against technology platforms has been a part of their day-to-day for many years. However, the need for class action defence lawyers is spreading rapidly to the UK and beyond. For many countries this is a relatively new but very significant trend. It’s one we could dedicate pages to, but we set out below the TLDR summary of what’s happening.
UK: CAT all the way?
The UK’s Competition Appeals Tribunal is currently the only forum where a viable opt-out class action mechanism is available. Tech platforms are a major target, particularly for allegations of abuse of dominance – the cumulative value of the 17 active CAT claims against tech companies currently amounts to nearly £30 billion.
Claims can only be brought in the CAT if they are competition complaints. This leads to some instances of “shoe-horning” complaints which, at their core, are really consumer protection or data privacy claims, into the competition framework, which poses challenges for all involved.
To date, the issues heard in these claims have been largely procedural, providing guidance on important components of the class action regime such as the threshold for class certification (short story, it’s low), permissible funding arrangements (funders cannot take a percentage of damages), and the role of economists (very short story, it’s critical). There has only been two, relatively minor, collective settlements approved by the CAT to date, and the first substantive post-trial judgment is expected towards the end of 2024. The regime is therefore still in its relative infancy but is anticipated to remain the favoured forum for tech class actions for the foreseeable future.
There is lobbying from some quarters for the regime to be extended to areas of law beyond competition, in particular consumer protection and data privacy complaints. Concerns this raises are the danger of the CAT becoming flooded, and that that there may be more appropriate venues for these specialist claims. One new law, the Digital Markets, Competition and Consumers Act, already contains provisions for private collective actions in the CAT in the event of certain failings by companies under the Act (which, as it’s name suggests, very much has tech companies in its scope), which in itself is likely to lead to increased business for the CAT.
Beyond the CAT, claimants have struggled to structure group claims in a manner which the UK civil courts consider appropriate and, in essence, certifiable. The main reason for this is that the only opt-out mechanism, known as a “representative action, requires the class representative to have the same interest as everyone else in the class which, in consumer claims, is difficult to establish. The UK civil procedure also provides an opt-in mechanism (a “GLO”) but this requires a huge upfront investment of time and money to build the class and can only be used where the court rules that GLO use is proportionate and efficient (which in recent cases it has appeared reluctant to do).
EU: the start of a tidal wave?
In mainland Europe, class actions are growing too, albeit at differing speeds across the continent. Two jurisdictions are head and shoulders ahead of the rest in terms of numbers of actions filed against tech companies – the Netherlands and Portugal. Both countries have enacted opt-out class action regimes which have been much used over the last few years.
The Netherlands has led the way in class actions for many years. In addition to the availability of the opt out mechanism, it also has a) very active consumer associations whose raison d’etre is to file litigation to change practices by businesses which they perceive as harmful to consumers; and b) a strong litigation funding market. This combination has led to high numbers of class actions being brought against tech companies in recent years, with a particular focus on data privacy complaints since the introduction of the GDPR.
Portugal is the new, and very popular, kid on the block. Despite having had an opt out mechanism available since 1995, claimants appear only to have woken up to this tool in the last 2-3 years. But they are now making up for lost time! 130 new class actions were filed in Portugal in the last 12 months – these are not all, by any means, against technology companies but there is at least one case pending against each of the major tech platforms (and some are facing several actions) with more believed to be in the pipeline. There are 2 main consumer associations behind nearly all of the claims, which tend to focus, insofar as tech claims are concerned, on competition and data privacy complaints. The associations are not averse to taking class actions which have been filed elsewhere in Europe and replicating the complaints in Portugal. What makes these claims so worrying for defendant companies is the lack of checks and balances one would expect from, say, the UK litigation system. For example, there is no court fee to file an action, there is no certification stage for proceedings and claimants are not responsible for the defendant’s legal fees even if the defendant ultimately wins the case. This encourages the associations to file claims with impunity. None of the class actions have made it to substantive trial yet, so it is a case of watch this space to see how the Portuguese courts treat them in due course.
It is anticipated that we will soon see the emergence of other class action hotspots within the EU. The main reason for this is a new law, the Representative Actions Directive, aimed at ensuring a base level of availability of consumer class actions across the continent and which each Member State is meant to have implemented into its domestic legal system already (although some are running behind schedule). Being a Directive, each country has discretion as to how it implements. The Directive leaves it up to each Member State to decide, for example, whether to go with an opt in or opt out class actions system. This is likely to be a critical decision; those which have chosen opt out for damages claims (so far Sweden, Slovenia and Hungary) become immediately more attractive to claimant groups, particularly if they also introduce permissive litigation funding rules. Another country to keep an eye on is Ireland. Currently, its choice of an opt in class actions model, and its complete ban on litigation funding, does not make it a good choice for claimant groups. However, a review is underway on the funding rules and, should those change, so too could the class actions landscape in the country which many major tech platforms call home. One other place of interest is Spain – yet to decide upon its implementation of the Directive, but currently touting an opt-out model which could lead to a replication of the class actions market neighbouring Portugal has already grown.
Aside from the procedural changes taking place across Europe, there are new substantive laws taking shape which also seem likely to increase the class actions market in years to come. Where regulation leads, litigation tends to follow. The DSA and the DMA are in force now and the first claims based upon alleged breaches of those laws have already been filed in courts in Belgium and the Netherlands. Beyond that, the Product Liability Directive (which includes as a “product” certain types of software and AI, and which stipulates that harm such as “distress” is compensable) and the AI Liability Directive are on the horizon. A glut of AI class actions have been filed in the US already and, as we’ve seen with other types of class action, bad news can travel across the Atlantic pretty quickly. Other areas of regulatory scrutiny currently include the adtech ecosystem and child safety issues, areas where tech companies are often at the centre of the debate.
So that’s the news from around Europe with, it seems, plenty more to come. As stated above, in most countries this is a new trend and there’s a lot of wrinkles to be ironed out as the courts focus in on the complaints and start to grapple with the many challenging legal and policy issues they raise. However, for now, it appears to be all systems go – meaning tech companies may need to stay ready to fight court battles on multiple fronts for some time yet.
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