THE PREVENTIVE FUNCTION OF COLLECTIVE ACTIONS FOR DAMAGES IN CONSUMER LAW
Roger Van den Bergh & Louis Visscher
Abstract
From a deterrence
perspective, private enforcement of consumer law can be insufficient for
several reasons. Individual consumers may find it too costly to start a lawsuit
(‘rational apathy’) or they may not even know that an infringement has occurred
(‘information asymmetry’). If public enforcement is not available, or if the
budget of public authorities is limited and used for other purposes, the
problem of under-enforcement will persist. Collective actions may be able to
mitigate these problems. If many consumers can join their claims, the costs per
claim decrease so that the rational apathy problem might be overcome. If
consumer associations have standing, they might be able to acquire better
information regarding infringements than individual consumers are able to do.
However, collective actions pose problems of their own. The leading plaintiff
or the organisation issuing the collective action could try to advance its own
interests, rather than furthering overall consumer interests. Moreover, a
large-scale lawsuit might harm the reputation of the defendant and thus create
the possibility of ‘frivolous suits’. The paper discusses a number of
possibilities to overcome these problems. Ultimately, private and public
enforcement will need to co-exist, since collective actions are not a perfect
instrument to achieve optimal deterrence.
