BRITISH business is facing a billion-pound assault by consumer groups as ministers prepare to allow a version of US-style class actions against dodgy retailers and shoddy workmanship for the first time.

Public bodies, such as council-run trading standards departments, are to be given the power to bring prosecutions on behalf of groups of customers seeking compensation.

Hundreds of cases could be brought each year under the proposed laws, which businesses fear may be exploited by consumer groups who want to mount “crusades”.

Previously, individuals had only the costly and complex option of going to court themselves, and were barred from asking trading standards or other consumer groups to pursue compensation claims on their behalf.

Business groups say that the existing “no win, no fee” system should be adequate to protect consumers, but the Government thinks that too much compensation awarded by courts is eaten up by lawyers’ fees.

The Government estimates that consumers lose more than £10 billion a year because of substandard work or unprofessional business behaviour. The Department of Trade and Industry is looking at ways to ensure that the proposed changes are used to champion consumer rights and not exploited as a tool for one business to disadvantage another.

Reform has widespread support among trading standards officers. Birmingham council’s trading standards department estimates that it could result in between 10 and 20 cases a year in that city alone. A spokesman representing trading standards officers nationally said that his members expected “hundreds” of prosecutions a year under the new system.

Which?, formerly the Consumers’ Association, said that it would use the powers to seek compensation on behalf of groups of consumers. It would use newspaper adverts to ask people with specific grievances to sign up for compensation.

A DTI spokeswoman said: “Consumers are generally quite reluctant to bring civil cases on their own because they are put off by the perceived complexity of the system or the high cost. Sometimes, whole groups of consumers suffer at the hands of the same company. In this scenario, it would make sense to allow the individuals to be represented by a suitable body.”

The CBI and the Institute of Directors claim that it would lead to a surge in claims against members. Both fear that a new law could be used maliciously to run “crusades”. A CBI briefing paper said: “There is clearly the potential for misuse of these proposals by mischievous, publicity-seeking single- issue groups. The decision to bring forward these proposals does not square easily with the policy of the judiciary and this administration to discourage the growth of litigation and to promote other means of redress and dispute resolution.”

A spokesman for the British Retail Consortium said: “If there is going to be a change, it has to be clear that any extra benefit to consumers is in proportion to any extra costs to retailers. So if you open the door to individuals being able to join a class action at no cost to themselves even when a retailer is entirely in the right, they will be faced with high costs of defending themselves while the individuals are risking nothing.”

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