Proposed consumer lawsuit regime may expose businesses to mass litigation
The UK government’s proposal for a class-action scheme that allows consumers to collectively sue businesses could wreak havoc if greenlit, as businesses could face ‘increased litigation risk’.
The Law Commission, sponsored by the Ministry of Justice (MoJ), proposed project, expected to commence in Autumn 2026, will identify the benefits and risks of introducing a more general consumer class actions regime.
This comes as the government asked the Commission to assess if current consumer law enforcement “could be strengthened” through the overhaul, toying with the idea of an opt-out model.
In the UK, opt-out models are currently limited to competition cases only.
The competition regime, introduced in 2015, has resulted in additional expenses for businesses, as class actions cost the UK £135bn in 2024 and are increasingly used as a litigation tool.
Emily Cox, partner at Pinsent Masons, said: “This is the clearest sign yet that the government is at least philosophically drawn to expand the opt-out regime beyond competition law.”
If the class action regime succeeds, it will expand to allow general consumer rights to be exercised for product descriptions deemed misleading, faulty goods, or contract terms considered unfair.
UK businesses hanging on by a thread
British businesses are already on an economic cliff edge and struggling to stay afloat, facing post-Brexit trade challenges, surging exchange-rate risk driven by global currency volatility and geopolitical instability, and rising labour costs from the overhaul of employment rights.
Now, if this regime goes ahead, it could lead to an uptick in eye-watering class-action costs.
Clifford Chance’s partner Maxine Mossman told City PM that if the regime passes, “the implications could be far-reaching.”
“The introduction of a dedicated consumer class actions regime would mark a significant shift in the litigation landscape, and the proposals are likely to attract close scrutiny and active engagement from across the market,” she explained.
This comes as the Institute of Economic Affairs issued a warning in September that a surge in class action cases could cost the country up to £18bn.
Class action litigation risk to soar
Alongside an opt-out model, the Law Commission is also mulling what should actually constitute a consumer law claim under the class action model, a move experts say could create significant litigation risk and mounting legal costs for companies.
Hogan Lovells partner Matthew Felwick told City PM the regime has potential to “catch a very wide range of obligations” that fall under consumer law, and therefore “many sectors and businesses would be facing increased litigation risk.”
Seema Kennedy, executive director of business and consumer campaign group Fair Civil Justice, said: “We hope the Law Commission will consider non-litigious solutions.”