Tuesday, 24 April 2012

At last, cash for ripped-off consumers

There's a deep injustice when companies are nabbed for fixing prices: they get punished, but the victims - that's you and me - seldom get anything out of it.

But today ministers are promising to do something.

The problem is that it's easy to fine a company millions of pounds, but harder for shoppers to get compensation for their financial injury, because it may be that many thousands of them have only lost a few pounds or a few pence each.

Here's an example: overpriced football shirts.

A few years ago, the Office of Fair Trading fined JJB £6.7m for fixing the prices of replica England and Manchester United football shirts. 

Which? led a legal action to win refunds for buyers and won £20 each. But only 130 victims had signed up, fewer than 0.1% of those affected. The rest received little or nothing.

In other words, you can sue the business, but only consumers who sign up for the legal action get a payout. The silent thousands still get zilch.

Hence the importance of today's proposal from the government's Department for Business, saying that there should be a system in which victims have to opt out of legal actions. 

Automatically, everyone would be compensated, apart from those who had decided not to take part.

This could look more like a US-style class action than anything we have here at the moment, although the Department for Business stresses that it doesn't want a parade of no-win-no-fee lawyers bringing "unmeritorious" claims. In other words, trying it on.

US practices, like the potential for winning three times the damages as compensation and not paying the company's costs, even if you lose, won't be adopted here.

And the Department will limit the new "opt-out" actions to cases where competition law applies.

Another instance came when Hasbro, Argos and Littlewoods were hit with multi-million pound fines for hatching price-fixing agreements on the prices of certain toys and games. 

It was back in 2003. Consumers probably lost millions of pounds in total, but only a few pounds each. So starting a legal action on behalf of just a few of them would have been pretty pointless.

Consultation on the new opt-out regime is starting today and finishes in July. Then new legislation would be needed to introduce the system.


  1. You might remember me as you visited my home twice for Working Lunch. A couple of years ago, there was a class action on behalf of the shareholders who were victims of the Langbar International fraud. It was called a Representative Action and the shareholders that participated received more than six times the amount the others received. You had to opt out of the Scheme that the company ran to maintain your legal rights, but it paid off in the end. You will hear more about this in the future, as there's an application in ECHR concerning defamations that occurred after this case.

  2. Yes I remember - thanks for the info