Legislation

If France moves towards US-style class actions, innovation will be stifled: Lawyer

07-Aug-2014
Last updated on 07-Aug-2014 at 15:02 GMT - By Annie-Rose Harrison-Dunn+
"It can raise prices, it can scare off companies. It can stifle innovation because the fear is you're going to get hit with a class action," says lawyer.
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Plans to expand the scope of class actions in France could be part of a wider trend towards group claims of damages to health as seen already in the US, according to a law firm urging food and beverage companies to engage on the policy.

The proposals came as part of French Minister of Health Marisol Touraine’s National Health Bill, which if passed would extend class actions – where a group of people in similar circumstances can collectively sue another party – to claims involving injuries to health. The draft health bill followed a French consumer act, Loi Hamon, which saw a class action procedure for consumer protection and antitrust claims written into law in March, something international law firm Shook Hardy & Bacon called “troubling”.

Marc Shelley, a partner at Shook Hardy & Bacon’s Geneva office, told FoodNavigator if the French government did not fine tune its proposals to ensure it was fair to both consumers and companies and backed up with appropriate legal provisions, consequences could include raised prices and stifled innovation. 

As the health bill currently stands it would most likely only apply to food and drink manufacturers marketing their products for health purposes. However, Shelley said the changes were part of a general trend in Europe buoyed by recommendations from the European Commission that member states introduced class action procedures into their laws and could therefore see big implications for the sector in the future. Similar moves have been seen in elsewhere. 

Before the consumer law was announced, France did not have a collective redress mechanism.

Shelley said the French government had been keen to pass the consumer law so played it conservative with a restricted scope to include labelling and the legal and contractual obligations only and exclude personal injuries. At the time, a 30-month timeline was set to evaluate how the consumer law and class action provision was operating before deciding whether to expand. However this latest addition to the separate health bill now sees the inclusion of personal injury claims, albeit for specific health care products only.

Unfolding events

Emily Fedeles, an associate at the law firm’s Geneva office, told us these class action changes enabled claimants to “band together” and gave companies just one opportunity to defend itself against those collective claims. “You only get one bite at the apple and of course there’s a difference between paying a couple thousand Euros to one plaintiff, and paying a couple thousand Euros to a couple thousand plaintiffs.”

Asked if the changes could see fizzy drink, confectionery and junk food companies facing actions for conditions like obesity and diabetes, Shelley said this was already being seen in the US and there was “certainly a trend in this direction” in Europe, but that the region was not yet at this point.

“Where we’re at in Europe, that’s a long way down the road, perhaps. But it’s kind of ‘watch this space’.”

He said although the list of products within National Health Bill did not include food and beverage products per say, there was clear interest shown in expanding its scope over time when it was debated.

“For a food and beverage company right now... under the current consumer law that will take effect October 1st, there may be labelling issues or marketing or competition concerns. But it is at least circumscribed at the moment in terms of how far this risk will go.”

He said food and beverage firms should “watch and monitor” the development closely as it is interpreted, applied and potentially extended in the course of the parliamentary debate and beyond.

Greater consumer protection?

Shelley said the argument for these changes was that they would “open the court doors a little wider” for consumers, offering greater access to justice processes. However he said the language was not yet clear enough at this point in France to guide all parties in knowing whether such a case should even reach the court rooms as a class action.  

“The danger for companies and the danger for consumers too quite frankly is that when these are put together in the right way. In order to ensure the right types of actions are being bought by the right types of claimants against the right types of companies, you need to have clear provisions in the rule to allow the parties and the courts to make that decision.”

“The consequence for that is that it can raise prices, it can scare off companies. It can stifle innovation because the fear is you're going to get hit with a class action and it's going to take away from the company and away from their bottom line and their stock prices.” 

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