Group litigation bytes big tech

It has been reported by various news outlets this week that, according to recent research by Thomson Reuters, the number of class actions being raised in the UK is on the increase, with a particular rise in claims against big technology companies.

Is there a reason for this?

Within the last couple of years there have been a number of high-profile, multi-billion pound claims raised against some of the world's largest technology companies, primarily relating to alleged anti-competitive behaviour.

Although the growing presence of technology companies in recent times may lead to an increase in litigation in the IT sector more generally, one of the catalysts for the recent spike in class actions would appear to have been the grant, for the first time, of a 'Collective Proceedings Order' by the Competition Appeal Tribunal ("the CAT") in 2021. This confirmed that a class action, in relation to a claim against a global credit card company, could proceed on an 'opt-out' basis, meaning that there was no requirement for each individual claimant to have opted into the proceedings. In these circumstances, potential members of a class will be included unless they actively opt-out.

Following this decision, there have been further examples of high value competition claims being raised on behalf of large groups of claimants on an opt-out basis and this would appear to be a key reason for the overall increase in group litigation in the UK.

In terms of why this has been directed at large technology companies in particular, this may be because of the number of high-profile organisations in this sector which are in a prominent position in their particular markets and therefore at risk of claims that they have abused that position. There are huge numbers of people accessing those companies' services on a daily basis, which potentially gives rise to very large classes of claimants and high overall claim values – and from a recovery perspective, the largest technology companies are likely to have the financial means to meet any award which may be made.

Such claims, given their value, are also potentially very attractive to third party litigation funders, which will enable more claims of this nature to proceed. Litigation funders, if they agree to provide funding, will generally cover the funded parties' legal costs in exchange for a share of any recovery, which significantly reduces the litigation risks that the funded party would otherwise face.

For more on litigation funding generally, please see our previous blog and podcast.

What about claims which are not based on competition law?

An increase in the number of group cases proceeding before the CAT on an 'opt-out' basis may encourage potential claimants to raise proceedings on a similar basis in non-competition cases, as class actions can currently proceed on either an 'opt-in' or 'opt-out' basis before the English courts (depending on the procedure which is used). The Supreme Court's decision in the case of Lloyd v Google LLC in 2021 has prevented a similar surge in relation to data privacy class actions, but it remains to be seen whether there will be an increase in other areas. We are continuing to monitor developments here.

In the Scottish courts, where, following the introduction of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 ("the 2018 Act"), it has been possible to proceed with class actions (known in Scotland as group proceedings) since 2020, the rules currently only provide for an opt-in procedure. However, the 2018 Act introduced a framework which allows for both an opt-in and opt-out procedure. Accordingly, it may be that there is scope for group proceedings to be raised on an 'opt-out' basis in the future.

In the meantime, group proceedings have, in any event, been gaining momentum in Scotland since their introduction and we would anticipate that they will continue to do so whether or not there is scope for them to proceed on an opt-out basis.

For a more detailed overview of the difference between the English and Scottish systems for group litigation, see our previous blog.