In this Institute of Economic Affairs briefing, managing editor Daniel Freeman interviews Stephen Dnes, a competition lawyer with 15 years of experience and lecturer at Royal Holloway, University of London, about his new IEA report, titled “Class Act,” examining the rise of class action litigation in the UK. The discussion covers the dramatic growth of opt-out class actions since their introduction in 2015, with current claims totaling between £95-135 billion and potentially affecting every adult in Britain as claimants in multiple cases. Dnes explains how these cases work, from hardcore cartels like alleged salmon price-fixing to more contentious claims involving data usage by tech companies.

The conversation reveals significant problems with the current system, including cases taking up to nine years to complete, mixed quality claims, and conflicts of interest between third-party litigation funders, lawyers, and consumers. Dnes highlights the dramatic Merricks versus Mastercard case, which after nine years resulted in a settlement where funders initially attempted to claim £179 million of a £200 million settlement, leaving just 48 pence for each of the 44 million claimants. He explains how the current funding structure creates perverse incentives that can delay settlements and prioritize funder returns over consumer compensation.

Dnes proposes market-based reforms to address these issues, particularly requiring funders to pay out a portion of claims upfront to demonstrate their confidence in cases and ensure money actually reaches consumers. Drawing on examples from Germany's emerging system, he argues this would weed out weak claims, speed up proceedings, and align incentives between all parties. The discussion concludes with Dnes expressing cautious optimism about potential government reforms, noting that legal changes are inevitable due to recent court decisions, though the scope of broader reforms remains uncertain.

Read “Class Act” here.

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