This is arguably more of an environmental case, rather than a competition matter.
Boris Bronfentrinker, a partner at US law firm Willkie Farr & Gallagher, says: “Competition law is being stretched and pulled and all sorts of things have been done to it in order to fit these cases.”
There are concerns that consumers are also sidestepping market watchdogs and taking their grievances straight to court. This duplicates many of the regulatory processes companies may already face, further weighing down businesses.
Litigation funders have pushed back against these criticisms, arguing that the risks of huge financial losses means that they cannot afford to bring unmeritorious competition claims.
Steven Friel, chief executive of Woodsford, a funder that settled its train ticket class-action case against Stagecoach earlier this month for £25m, says: “We stand to suffer significantly – these are very expensive. So we don’t do this without a significant amount of conviction.”
While there are costs involved, cases can also be highly lucrative. Law firms earned more than £1bn in estimated fees from the first wave of UK competition class actions before the cases had even settled or concluded, according to recent research by Law.com.
Litigation funders argue that any complaints over costs should be directed at the companies they are taking on, accusing them of trying to outspend and outlast their opponents.
Another criticism of the boom in class action cases is that it is short-sighted.
Businesses on the hook for huge payouts will inevitably pass these costs onto consumers by hiking prices, says Seema Kennedy, Ofwat board member and executive director of Fair Civil Justice Society.
“Consumers are drawn into these pieces of litigation often without understanding what the downside risks of litigation are and not really fully exploring all the alternative means of redress,” the former Conservative MP adds.
Neil Purslow, chairman of the International Legal Finance Association and co-founder of Therium Capital, which funded the subpostmaster civil claim against the Post Office, believes all these criticisms are misguided.
The class action system “preserves the integrity of the UK’s pro-business culture and deters bad actors from acting with impunity,” he argues.
“It also upholds the rule of law, which is integral to attracting investment into the UK economy.”
BT’s case ended in March but a judgment is yet to be handed down. The outcome will be watched with interest not just by the telecoms company but other British bosses anxious that their company could be next.
