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Commercial Regulatory Issues

Omni Bridgeway Weighs In on New Zealand’s Proposed Class Action Reforms

As regulation continues to be the subject of debate in the litigation funding industry, the differences in approach across jurisdictions has shed light on wider issues of legislation covering litigation. In New Zealand, this has most recently manifested through the government’s review of its class action regime and the impact of litigation funding. In an article for BusinessDesk, Omni Bridgeway’s Gracey Campbell offers a funder’s perspective on the Law Commission’s report on class actions, released in June of this year. Their analysis praised the Commission’s recommendations for courts to oversee concurrent class actions, but argued that where concurrent actions do not include members present in both actions, then they should not be classed as competing actions. Furthermore, Campbell suggested that any kind of certification test would only increase the time and cost burdens on proposed class actions, without providing significant benefits. With regard to the Commission’s proposals for third-party funding regulation, the article praised the report’s view of funding as primarily existing to provide access to justice, as well as the decision not to impose any kind of mandatory level of returns to class action members. However, Campbell argued against the proposal of a ‘rebuttable presumption’ that funders would provide for security costs, and instead argued in favour of giving the courts the power and discretion to order this based on a case’s individual circumstances.
Commercial Deals

General Counsels Share Views on Third-Party Litigation Funding

A common refrain from leaders and commentators in the litigation funding industry is that one of the biggest developments that has fuelled growth has been the uptake of third-party funding by corporates. However, the exact type of situation and motivation for these large companies to engage funders is not so clear, and some in-house counsels are still struggling to see the benefits over self-funding. Reporting from the International Legal Finance Association’s (IFLA) inaugural conference, Legal Newsline, highlighted comments by general counsels (GCs) at some of America’s leading companies that suggest widespread acceptance is still not a reality. Rishi Varma, general counsel for Hewlett Packard Enterprise, acknowledged that while the industry has momentum, GCs still have concerns around undue influence and control by funders over the litigation process and settlement decisions. Looking at the issue from a different perspective, Raytheon Technologies’ chief litigation counsel, Steven Greenspan, argued that a large obstacle is the imbalance in returns that a funder may receive. Greenspan stated that a situation where the funder’s own returns outweigh the client’s is a major issue, therefore funders may need to explore structure agreements which see a more equal distribution of financial return if companies are to be enticed. However, not all GCs shared the same concerns and objections. Sandy Grimm, chief legal officer at Southeastern Grocers, highlighted the benefits of being able to shift costs off the balance book and reduce impact on the company’s budget. Grimm pointed out that being in an industry that primarily values a company’s EBITDA, the value of moving those costs away from the budget and onto a third-party does represent a major benefit.
Commercial

Legal 500 Releases Funder Rankings and Shares Industry Insights from Litigators

Legal 500 has announced its litigation funding rankings for 2023. This year sees the rankings expand to cover not only the top UK funders, but also the leading funders in the US market. In its article announcing the 2023 rankings, Legal 500 provided an update on the state of the market with insights from industry leaders and litigators in both regions. Diane Sullivan, a partner in Weil’s New York office, described how the size and breadth of the industry had grown, with funders now engaged in a wide variety of cases from patent litigation to mass tort cases. Commentary from litigators also stressed the importance of the relationship between law firms and funders, with Jonathan Sachs, partner at BDB Pitmans in London, highlighting the need for funders to trust solicitors and to avoid trying to control the litigation process as a third-party. Meanwhile, Hausfeld’s Lucy Rigby pointed out that funders now exist in a competitive market, and to stand out from the crowd, they must go beyond just providing capital and excel in terms of speed and transparency Legal 500’s finalised rankings for this year included ten firms in its UK listings, whilst its inaugural US rankings included nine funders. Burford, Harbour and Therium were all listed as tier one funders in the UK, and Burford repeated that achievement in the US, alongside Omni Bridgeway. It is worth pointing out that Legal 500 has yet to disclose its methodology for assigning funders to its various tiers.
Commercial Regulatory Issues

Deminor’s CEO Argues the EU’s Proposed Fee Caps Would Harm the Industry

As Litigation Finance Journal has reported in recent weeks, the response to the EU Parliament’s approval of the Voss Report has been largely negative from industry leaders across the continent. Whilst funders and law firms alike recognise the need for regulation and oversight, the specific proposals in the report have been criticised for addressing problems that don’t exist, and for a lack of empirical basis. In an interview with The Law Society Gazette, Deminor’s CEO, Erik Bomans, specifically took aim at the proposal to cap litigation funders’ fees to 40% of any awarded damages. Bomans argued that a hard cap like this would result in cases not receiving much-needed financing, as any funder must weigh potential returns against the inherent risks of a case which includes the possibility of exorbitant costs driven up by a prolonged process. Bomans reiterated the criticism of many industry leaders that the proposed changes represent an incomplete understanding of the third-party funding industry, with Bomans further comparing it to the actions of the US Chamber of Commerce, which has always opposed and lobbied against the industry. Bomans argues that there is no more pressure placed on a client by a funder than any normal relationship between a claimant and their legal counsel, citing the existing oversight in place from the courts themselves.
The LFJ Podcast
Hosted By Alexander Garnier |
In this episode, we sit down with Alexander Garnier, Founding Partner and Portfolio Manager of North Wall Capital. Alex discusses the firm's background, how it came to be involved in the legal assets space, the risks and challenges for investors in the space, how North Wall differentiates itself from the competition, and the firm's ESG initiatives. [podcast_episode episode="10549" content="title,player,details"]
Case Developments Commercial

LCM Funds £900 Million Class Action Against Amazon

Class actions alleging anti-competitive behavior by corporations have become a frequent sight in the UK litigation space, with the Competition Appeal Tribunal as venue for these high-stakes showdowns between consumers and businesses. Many of these actions would not be possible without third-party funding, and last week saw yet another example, as Litigation Capital Management (LCM) announced the financing of a new claim against Amazon. Detailed in reporting by The Guardian, the e-commerce industry leader is facing a class action suit alleging that its ‘Buy Box’ feature misinforms consumers by highlighting products and sellers beneficial to Amazon, rather than promoting the genuine best deals and prices. Julie Hunter, the class representative for the case, argues that by putting either Amazon’s own products or retailers who use Amazon’s logistics services at the top of their online store, the company is using its dominant position to deny consumers’ fair choice. The CEO of LCM, Patrick Moloney, said that this case was the latest in a series of competition-related cases that the firm has funded, and that the funder would continue to support consumers in disputes in the UK. The £900 million class action covers all UK consumers who purchased products through Amazon since October 2016, and is an opt-out claim. Amazon’s representative denied any wrongdoing by the business, and stated that there was no merit to the claim, as the company has always supported independent sellers and therefore allowed consumers to choose from the best prices.
Case Developments Commercial

Woodsford Funds $1 Billion Class Action Against Toyota Australia

The Volkswagen emissions scandal of 2015 stands out as one of the largest automobile industry scandals in history, and one of the most notable examples of a corporation facing repercussions for violating environmental standards. In what may be a successor to that, Toyota is facing a major class action suit in Australia, alleging that it produced hundreds of thousands of vehicles with so-called diesel defeat devices (DDD). An article by Sky News Australia illustrates the scale of this class-action, which alleges that up to 500,000 vehicles may have been affected, with the prospect of a settlement that could exceed $1 billion. Maddens Lawyers Australia, which is bringing the action against Toyota, argue that Toyota’s conduct was both ‘misleading and deceptive’ and violated Australian Consumer Law. Brendan Pendergast, special counsel at Maddens Lawyers, argues that if the allegation is proven, then this would represent one of the largest class action successes in Australian history. The class action is being funded by Woodsford, as part of an ongoing push by the funder to back cases targeting ESG violations and open avenues for consumers who otherwise would lack the capital to seek legal redress. Charlie Morris, chief investment officer at Woodsford, states that this action is about offering justice to consumers who were deceived, as well as holding corporations to account where they deliberately act in a way that harms the environment. In a statement, Toyota Australia denied any wrongdoing and stated that all of its processes meet emissions standards, and that they will strongly defend against this class action.
Commercial Deals

New Law Firm Brings Together Transatlantic Expertise to Target Group Litigation

As Litigation Finance Journal heard at IMN’s conference this week, group litigation continues to be a growing market and one of particular interest to litigation funders in the UK and around the world. Therefore, it is perhaps no surprise that a new law firm has launched in the UK, specifically targeting this area of litigation. As reported in The Law Society Gazette, the launch of Lanier, Longstaff, Hedar & Roberts LLP represents a transatlantic partnership between two English barristers and a US trial lawyer. Mark Lanier, founder of The Lanier Law Firm, along with its chief operating officer, Kevin Roberts, represent the American side of this partnership. While both the UK founding partners, Tom Longstaff and Ducan Hedar, hail from Manchester-based Exchange Chambers and have both previously worked as solicitors at Linklaters. Mr Lanier stated that he views the UK as an ‘emerging market’ for the same kind of group litigation that has flourished in the US, whilst Mr Longstaff agreed that there is a great opportunity for UK litigators to learn lessons from legal actions in the US that seek to represent groups of consumers seeking justice. Now that the firm has been granted its license by the Solicitors Regulation Authority, it expects to announce its first case in November, and will continue to recruit staff for its office in Manchester.
Announcements Case Developments Commercial

Hausfeld & Co LLP: Amazon faces £900m demand to compensate tens of millions of UK customers, as Lawsuit accuses E-Commerce giant of unlawfully favouring its own product offers

A ground-breaking new legal claim (“UK Buy Box Claim”) alleges that Amazon has breached competition law and caused millions of UK customers to pay higher prices for products sold on Amazon.co.uk and the Amazon mobile app by obscuring better-value deals.

The opt-out collective action, to be filed in the Competition Appeal Tribunal in London, will allege that the Big Tech company abuses its status as the dominant online marketplace and harms customers by channelling them towards its “featured offer”.

This featured offer – prominently located in the “Buy Box” on Amazon’s website and mobile app – is the only offer considered and selected by the vast majority of users, many of whom trust Amazon and wrongly assume it is the best deal.

However, Amazon uses a secretive and self-favouring algorithm to ensure that the Buy Box nearly always features goods sold directly by Amazon itself, or by third-party retailers who pay hefty storage and delivery fees to Amazon, it will be alleged.

The Buy Box is designed and presented in a way that effectively prevents millions of consumers from navigating the site to find cheaper offers, or better delivery options, for the same product, according to the claim.

Such manipulation of consumers is a breach of Amazon’s obligation as the dominant marketplace not to distort competition. The claim will seek damages from Amazon estimated in the region of £900 million.

Julie Hunter, a longstanding advocate of consumer rights, is seeking to represent the interests of tens of millions of Amazon users in the collective action, which is due to be filed before the end of October.

Who is eligible

Anyone who lives in the UK and made purchases on Amazon.co.uk or on the Amazon app since October 2016 is an eligible member of the claimant class. In accordance with Competition Appeal Tribunal rules, the collective action is being filed on behalf of all potential claimants without them needing to actively opt in to the claim.

The case against Amazon

The e-commerce giant is accused of unlawfully abusing its dominant position. According to the claim, Amazon steers potential purchasers to products which are not designed to be the best offers for consumers. Rather, the so-called Buy Box offers are systematically biased to favour goods sold by Amazon itself as part of its retail business; and/or by third party sellers who pay to use Amazon’s order fulfilment and delivery services (which are a key source of revenue for Amazon).

Other sellers, who do not pay for Amazon’s fulfilment services, are nearly always excluded from the Buy Box, stifling their ability to offer consumers a better deal, and leaving consumers out of pocket. It will be alleged that Amazon uses the Buy Box feature to manipulate consumer decision-making - directing customers to the product featured prominently in the Buy Box, and thereby obscuring the full range of options available to them, which may be cheaper and/or offer greater value.

The claim will accuse Amazon of breaching section 18 of the UK Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union. It coincides with increased concern amongst the public and policymakers about Amazon’s dominant position as both a marketplace and a market participant (see Investigations and regulatory decisions, below).  

About the class representative

Julie Hunter has worked exclusively in consumer research, advocacy and protection for more than 20 years. She is an independent consultant who has worked with leading consumer organisations in the UK and abroad on topics such as consumer vulnerability, digital services, financial services, consumer rights, customer service and complaints.

Ms Hunter is Chair of the Consumer & Public Interest Network, an independent organisation representing consumers in the development of voluntary standards, supported by the UK standards body BSI. Ms Hunter is also a member of the Financial Services Consumer Panel (FSCP), an independent statutory body representing consumer interests in the development of UK policy for the regulation of financial services. Earlier in her career, Ms Hunter spent six years leading research projects and investigations at Which?.

Investigations and regulatory decisions

The European Commission is pursuing two formal antitrust investigations into Amazon.  One of these, initiated in November 2020, is evaluating the same alleged “self-preferencing” by Amazon as is alleged in the UK claim.  The Commission’s preliminary finding was that the rules and criteria for the Buy Box unduly favour Amazon's own retail business, as well as marketplace sellers that use Amazon's logistics and delivery services. The Commission is currently evaluating commitments offered by Amazon to address these concerns.

In July 2022, the Competition and Markets Authority ("CMA”) announced that it was investigating Amazon’s business practices, including how it sets the criteria for selection of the featured offer.  The CMA indicated that its investigation followed on from that conducted by the European Commission.

An investigation by Italy’s competition regulator concluded in December 2021 that Amazon had abused its dominant position by making certain benefits to third-party retailers conditional on their purchasing of its logistics service.

In the United States, the House Judiciary Subcommittee on Antitrust concluded that Amazon’s online retail dominance gives it monopoly power over third-party sellers on its US marketplace and that it effectively precludes retailers who have not purchased its logistics services from “winning the Buy Box”.

Statements

Julie Hunter, the proposed class representative in the action, said: “Nine out of ten shoppers in the UK have used Amazon, according to surveys, and two thirds use it at least once a month.  Like countless millions of people in the UK, I often use Amazon for the convenience it offers.

“Many consumers believe that Amazon offers good choice and value, but instead it uses tricks of design to manipulate consumer choice and direct customers towards the featured offer in its Buy Box. Far from being a recommendation based on price or quality, the Buy Box favours products sold by Amazon itself, or by retailers who pay Amazon for handling their logistics. Other sellers, however good their offers might be, are effectively shut out – relegated down-page, or hidden several clicks away in an obscure corner of Amazon’s website.

“Online shoppers have a right to be treated fairly and to be able to make informed decisions. This lack of transparency and manipulation of choice is an abuse of consumers’ trust, as well as a raid on their wallets.  Amazon occupies an incredibly powerful position in the market, making it impossible for consumers to take individual action. Amazon shouldn’t be allowed to set the rules in its favour and treat consumers unfairly. That is why I am bringing this action.”

Lesley Hannah, one of the partners at Hausfeld & Co LLP leading the litigation, said:

“Most consumers use the Buy Box when purchasing products on Amazon – estimates range from 82% to 90%. This means that millions of consumers have paid too much and been denied choice. This action seeks fair redress for them.

“Amazon takes advantage of consumers’ well-known tendency to focus on prominently-placed and eye-catching displays, such as the Buy Box. Amazon doesn’t present consumers with a fair range of choices – on the contrary, the design of the Buy Box makes it difficult for consumers to locate and purchase better or cheaper options. Amazon should not be allowed to take advantage of its customers in this anticompetitive way.” 

“Competition laws are there to protect everyone. They ensure that individuals can make genuine and informed choices, and are not simply led into making selections which benefit the companies they interact with. Fairness is at the heart of competition law and consumers are not being treated fairly by Amazon.”

Further information

Affected Amazon users, on whose behalf the class action is brought, will not pay costs or fees to participate in this legal action, which is being funded by LCM Finance, a global litigation funder.

Ms Hunter is represented by Anna Morfey, Lesley Hannah and Aqeel Kadri of Hausfeld & Co LLP, and by Marie Demetriou KC, Robert O’Donoghue KC and Sarah Love of Brick Court Chambers.

To learn more about Ms Hunter’s claim, please visit www.ukbuyboxclaim.com.

About Hausfeld & Co LLP

Hausfeld is a leading disputes-only law firm specialising in competition law, with significant expertise in all aspects of collective redress and group claims, including abuse of dominance litigation against Big Tech and other large corporates.

The firm pioneered the Trucks Cartel litigation in the UK, Germany and the Netherlands. It has acted on some of the most complex damages claims of the last decade: on the “Interchange Fee” litigation against Visa and Mastercard, in “Google Shopping” claims on behalf of price comparison websites against Google; against six financial institutions over their participation in unlawful price-fixing of the foreign exchange currency markets; and against Google, Apple and Qualcomm in relation to their alleged abuse of dominance concerning Google Play Store, Apple App Store and the smartphone chip market respectively.