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Consumer protection dragged into 21st century with new Bill that could open floodgates to class actions

A Consumer Rights Bill published on Wednesday (12 June) is set to radically overhaul the rights of consumers in the digital age but could open the door to US-style class actions, lawyers warn.

The Bill was one of many announced in the Queen’s speech at the state opening of Parliament in May, and if enacted, will enhance consumer rights by making them easier to understand and streamline complex areas of consumer legislation into a single bill.

However, the Confederation of British Industry, speaking for some 240,000 businesses that together employ around a third of the private sector workforce, has highlighted the dangers behind a provision that allows members of the public, businesses or consumers to bring collective actions on an opt out basis.

Matthew Fell, the CBI director for competitive markets, said: ‘We will resist any efforts to introduce US-style class-actions into consumer redress, which risks fuelling a litigation culture and making the UK a worse place to do business.

‘Consumer law should be fit for the digital age but any changes must be properly scrutinised before they are put into practice.’

Hogan Lovells partner and product liability specialist Rod Freeman says they are right to be cautious. ‘It could lead to more litigation and that’s the greatest concern,’ Freeman said.

Speaking to Legal Business, he added: ‘The great concern is these measures on this side of the Atlantic are expressly intended to avoid the excesses that you see in the US class action regime, but the practical reality is the kind of infrastructure that’s been described is naturally going to attract those excesses. There are real questions on whether the safeguards being put in place will be effective.’

Few question that reform of the out of date consumer protection framework is necessary and consumer minister Jo Swinson said: ‘For too long, the rules that apply when buying goods and services have been murky for both consumers and businesses.’

This situation has worsened in the digital age, and the Bill specifically covers consumers’ ability to claim for faulty digital content, including film and music downloads, online games and e-books replaced.

Oliver Bray, commercial, IT and technology partner at Reynolds Porter Chamberlain said: ”There is lots of overlap and uncertainty with legislation including the sale of goods act which is now 30 years old. The messy backdrop is a complex patchwork of legislation. What was slightly bizarre is you have a consumer buying a CD with more protection than someone who is downloading music online.

‘This is going to be good for everyone. It’s simplifying and clarifying, and hopefully will make us more competitive. We are moving to a more sane world where digital content in particular is covered and there’s clearer lines of redress for services than before.’

Freeman added: ‘The area of consumer law in the UK is a mess. One of the great challenges is for the legalisation to keep up with changes in technology and changes in practices in the market. It’s important that it’s coherent, understandable legislation in dealing with digital content as much as it’s important for tangible goods and for services.’

Elsewhere, trading standards officers will be required to provide reasonable notice to businesses before carrying out routine inspections, as well as speedier and faster remedies for businesses that have been disadvantaged by breaches in competition law.

Consumers currently spend more than 59 million hours every year dealing with goods and services problems, according to a government statement published. The hope is that the new measures will reduce the effort consumers and businesses have to make to resolve problems.