Webinar round-up | Collective redress: What UK tech businesses and SMEs need to know

On Wednesday 21 October, techUK hosted a webinar in partnership with Fair Civil Justice (FCJ) and the US Chamber of Commerce Institute for Legal Reform (ILR), Collective Redress: What UK Tech Businesses and SMEs Need to Know.

The session explored the growing use of collective redress in the UK, including the Law Commission’s consultation on a possible consumer class action regime and the government’s reforms to the existing opt-out regime in the Competition Appeal Tribunal (CAT), and what these developments could mean for tech and tech-adjacent businesses of all sizes.

We were joined by the following speakers:

Seema Kennedy OBE, Executive Director, Fair Civil Justice
David Meyerson, Executive Director of International Initiatives, US Chamber of Commerce Institute for Legal Reform

Webinar overview

The UK’s collective redress landscape

Seema Kennedy said that collective redress claims have ballooned in the UK over the past 10 to 15 years. She said the UK now outstrips every other European country on the number of cases, claimants and the value of claims, driven by the opt-out regime in the CAT and by opt-in routes such as group litigation orders. In her view, the tech sector is disproportionately targeted, and not only the largest firms. She added that, on average, everyone in the country is now part of around 11 claims, many of them opt-out claims people may not know they belong to.

FCJ is working with HM Treasury, the Ministry of Justice and the Financial Conduct Authority on the proportionate regulation of litigation funding. Seema stated that while tech businesses are highly regulated, the funders behind many claims against them often are not. FCJ also promotes alternatives such as complaints procedures, ombudsmen, mediation and ADR, which, in FCJ's view, can deliver redress without a lengthy and extractive court process.

Consumer class actions and product liability

Seema described the Law Commission’s consumer class actions project as potentially radical, since the usual European approach is opt-in. She warned that opt-out is very difficult to row back from once introduced, and that “opt out is delayed opt in”, because claimants must eventually take an active step to claim. Any new regime, she argued, would need serious scrutiny of distribution levels, incentives for funders and lawyers aligned with the claimant class, robust certification, a role for qualified entities such as consumer charities rather than profit-seeking commercial vehicles, and regulation of litigation funding alongside it. On the Law Commission’s recently opened product liability consultation, Seema cautioned against copying the EU’s Product Liability Directive.

She argued that the Directive effectively reverses the burden of proof, carries a long liability period and uses terms vague enough that only litigation could settle them. She warned that extending strict liability to software, AI and some online platform features would widen the pool of defendants, a particular concern for smaller tech firms. She also flagged a possible expansion of opt-out to all causes of action in Scotland, which might cause England and Wales to follow.

Litigation and ILR’s international tort cost research

David Meyerson presented ILR’s International Tort Cost Study, produced with Triple-I. It compares tort costs from 2013 to 2023 across the US, the UK, the EU’s five largest economies, Australia and Canada. The study finds tort costs are rising in almost every jurisdiction and outpacing growth and inflation, which ILR attributes to countries adopting US-style litigation procedures.

According to the study, the UK has seen the fastest growth of any jurisdiction studied. Its tort costs grew at an annualised 7.05% between 2014 and 2023, against GDP growth of 4.63% and inflation of 2.6%. The UK’s burden more than doubled in under a decade to 1.22% of GDP in 2023, compared with 2.15% in the US. On current trends, the study projects that the UK will overtake the US by the end of 2029 or early 2030. David stressed that this is not inevitable, pointing to targeted reforms in Canada and Australia.

What this could mean for SMEs

David warned against assuming only large multinationals absorb these costs. ILR’s 2023 study found that in 2021, US small businesses accounted for 20% of commercial revenues but bore 48% of commercial tort costs. The smallest firms paid $33.56 in tort costs per $1,000 earned, compared with $4.75 for large companies. ILR says this makes a litigious system more than seven times more expensive for a startup than for a large corporation.

For UK tech SMEs, David argued, every pound spent defending speculative claims is “a pound not spent on R&D” or on hiring talent. Seema added that SMEs often lack in-house legal teams, so claims consume executive time and costs fall disproportionately on them, with knock-on effects through supply chains.

US Chamber of Commerce ILR reports

Please see links to both ILR reports referred to during the webinar below:

International Tort Costs: A Comparative Analysis: https://www.uschamber.com/assets/documents/ilr/International-Tort-Costs.pdf
Tort Costs for Small Businesses: https://www.uschamber.com/assets/documents/ilr/Tort-Costs-for-Small-Businesses-12.5.23.pdf

techUK is responding to the Law Commission's consumer collective action call for views and will be responding to the recently opened consultation on product liability. We welcome input from members on all aspects of the proposals.