Group proceedings: hard to stomach for the Food and Drink industry?

For years, the food and drink industry has been a major driver of the economy in Scotland - not only serving a consumer base within Scotland but exporting significant amounts elsewhere, outwith the Scottish market. However, the recent introduction of group proceedings in Scotland may have opened the door for actions to be raised against companies operating in the food and drink sector by consumers who are unhappy with the way a product is marketed or advertised, even where the value of each individual claim is relatively low.

What are group proceedings?

The new procedure allows groups of two or more individuals, with the same, similar, or related claims, to come together to raise proceedings as a single action in the Court of Session. The procedure is similar to the class action procedure in the USA, but, unlike the USA's 'opt-out' system, where those within the class definition are automatically included in the proceedings unless they choose to opt-out, those wanting to take part in Scottish group proceedings must 'opt-in' to participate. For more information on how group proceedings work in Scotland, see our blog.

What relevance does this have for the food and drinks industry?

Whilst a group proceeding has yet to be initiated against a company operating in the food and drink sector in Scotland, other jurisdictions, such as the USA, have seen a recent uptick in class actions against food and drinks companies on a number of topics, including:

• Representations regarding ingredients (e.g., real vanilla or pure honey);
• Representation regarding the origin of products (e.g., Italian olive oil or Himalayan salt)
• The absence or presence of ingredients (e.g., the use of artificial flavouring, where a product is claimed to be 100% naturally flavoured)
• Ancillary representations regarding the product (e.g., relating to sustainabilityor ethical production or recycling).

Claims relating to the kind of topics noted above are often low in value and therefore unlikely to be raised as individual court actions. However, consumers now have the option to mobilise and join together with other individuals who have similar claims to raise a group proceeding. Where the class of individuals is large enough, a potential group proceeding could result in a significant total damages award, if successful, despite each individual claim being low in value.

The increase in these kinds of cases in other jurisdictions and the introduction of group proceedings in Scotland therefore raises the question - could similar actions be brought in Scotland, if consumers are concerned about the branding or marketing claims used to sell a product in the food and drink sphere?

What can I do to protect my business?

Whilst, like in Scotland, the raising of a claim does not necessarily mean a positive result for those bringing the action, the potential reputational repercussions and the costs associated in defending a court action (regardless of its merits) can be debilitating for a business.

If your business is potentially at risk from a group proceeding, consider whether you require to take proactive steps to mitigate that risk:

• Review your branding, marketing and labelling.

With consumers increasingly looking to buy sustainably produced and resourced products, as well as looking more closely into the ingredients used in the food and drinks they consume, it is important that businesses look closely at the way they brand, label and market their products. It is vital that businesses do not have anything misleading on products or marketing, include all required information on their labelling, that they do what they say they'll do and keep any promises they make to consumers.

• Consider whether you need to lodge a caveat or renew your existing caveat.

Caveats, Scotland's 'early warning system', are an invaluable benefit to those who may be at risk of group proceedings in Scotland. For more information about what caveats are and how they work in relation to group proceedings see our webpage here.

• Ensure you have a strategy in place if group proceedings are raised.

Given the potential financial impact group proceedings could have on your business, reviewing your insurance cover and, if required, putting your insurers on notice may be a vital step to protecting your business. Additionally, making sure a PR strategy is in place may help to mitigate the reputational risk which group proceedings can pose.