Chapter 3: Cy-près for Consumers: Ensuring Class Action Reforms Deal with ‘Scattered Damages’
3. Cy-près for consumers: ensuring class action reforms deal with “scattered damages” Geraint Howells 1. INTRODUCTION My starting point is that there are examples of small value consumer claims that affect many consumers which merit litigating because in aggregate they represent a significant consumer detriment and an unfair competitive advantage to the offending trader. For lack of a better term the German phrase “scattered damages” will be used to describe the problem. This inevitably leads me to favour an opt-out class action procedure given that individuals are unlikely to litigate for small amounts and regulators are unlikely to be able to deal with all such claims satisfactorily. However, my argument is that such a procedure by itself will not be enough for these types of claims so long as such schemes remain premised on the restitutionary model, which assumes the objective should be to give compensation only to those directly injured – or at least that this is the best solution. Instead new actors – consumer organisations – need to be encouraged by the promotion of an organisational cy-près trust fund. Under this scheme organisations protecting the consumers would be able to litigate and in appropriate cases damages would be given to a trust fund to promote the consumer interest. Olsen’s The Logic of Collective Action1 explains why consumers will not litigate individually for such small amounts. Put simply when the amounts at stake are small for individuals they do not have the incentive to litigate for such small amounts and...
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