A key question running through public policy discussions and judicial decisions is whether the UK’s collective proceedings regime can prove that opt-out claims deliver meaningful benefit to affected consumers.

Both forums are narrowing in on distribution as one of the key metrics. It links the policy debate about balancing consumer redress with economic growth to the judicial debate about access to justice and the cost of litigation.

The policy debate: balancing consumer protection with economic growth

In July, the government released a document for consultation that set out some of the broad principles that are shaping its thinking.

Distribution is at its core. As the government sees it, “success can be measured by returns seen by class members. It is too early to make this assessment…However, there is sufficient evidence to highlight potential for improvement and opportunities to maximise the benefits of the regime in the future”.

The public policy debate will respond to the ability of the CAT to steward claims that satisfy the benchmark for successful distribution. Albeit no one has put any hard numbers against what a successful distribution looks like.

The judicial discussion: cui bono

Distribution has been an important factor in a number of recent hearings and judgments. Class representatives, lawyers, funders and communications professionals are adjusting to additional scrutiny being applied to something that previously was often deprioritised.

The Gutmann settlement with Stagecoach South West Trains has been widely criticised for failing to get enough money to eligible individuals; a little over £200,000 of a possible £25m has been paid to consumers.  The government says, “the aspiration of the regime must be to achieve a greater rate of returns to class members than was seen in this case.”

All eyes are therefore on Merricks, which will finally move to distribute the settlement agreed with Mastercard, having seen off a Judicial Review from the litigation funder.

Communications clearly have a role to play in driving uptake of damages. Blanket social media advertising or telemarketing will not cut it any more. Trust is one of the biggest barriers to uptake, and this type of activity is too easily dismissed as a scam. Innovative approaches need consumer research, data modelling and highly targeted media campaigns to reach and, crucially, persuade those eligible for payments.

When is distribution relevant?

Responding to one of its potential vulnerabilities, the CAT is starting to consider distribution at the CPO stage and pressing Class Representatives on the practicalities earlier in the process. This means a much more sophisticated distribution plan needs to be submitted. This requires more investment at an earlier stage, to which funders will need to respond. To not have it not only risks the claim’s credentials for certification but exposes a real reputational vulnerability that defendants will exploit.

Other alternative distribution models are starting to gain some traction, including a centralised claims website, possibly administered by the Government or the CAT itself. This would clearly have some merits, but the CAT website is not very consumer-friendly and the Government generally does not do well on trust so it’s perhaps not a silver bullet to be relied on.

It has also been mooted that defendants could also play a role in distribution where, presumably, they possess data that enables it to communicate with or get money to the class. This might work in a settlement scenario, where a defendant might volunteer to be involved (or indeed see it as a substantial bargaining chip). But, in the event of a judgment against a corporate defendant, could the CAT compel them to participate in distribution or hand over data to a claims management company?

How the CAT asks for more detailed examination of distribution, whilst actively putting pressure on parties to keep costs at CPO down, seems a difficult question but it is an issue that it’s clearly on the CAT’s mind.

The issue of distribution is inextricably linked to whether the claims have a strong cost benefit ratio.  When refusing to certify the class representative in Waterside Class Limited v Mowi ASA & Ors. (the salmon cartel claim) the CAT expressed concern about the potential distribution to the class in comparison to the proposed cost of litigation, making an unfavourable comparison to the methods used in Gutmann v SWWT.

Defendants will press cost benefit ratio in their legal arguments as well as their reputation management strategy. Class representatives need an ambitions, yet credible, response.

Conclusion: the battle for trust

Communications has a very specific role to play in class actions. Defendants take seriously the prospect of being sued by a group of their customers or former customers; it has significant power to erode trust in a brand.

Class representatives on the other side have a duty to engage with the people in whose name they are pursuing a claim.  By definition, these are claims fought in the public interest and in the public domain.

The CAT, I’d argue, has read the mood well. Pressing claimants on issues that go to the core of the access to justice arguments, demonstrates that the CAT and the government seem to be aligned that the regime has more work to do to establish its credentials.

But it’s also clear that the government is, at a fundamental level, bought into the idea of opt-out claims. While the door remains ajar to expanding the opt-out regime, we can expect discussions in the court room to be used to advance arguments outside it. Claimants and defendants would be well-advised to prepare for both.

This is a shortened version of a longer contribution by Simon to the CMS European Class Action report, which can be read here.