Economic perspectives on the influence of third-party litigation funding on competition collective actions in the United Kingdom

This article takes an economic perspective on the impact of third-party litigation funding on collective competition actions in the UK. Third-party funding has emerged as a crucial mechanism enabling collective actions; however, the reliance on such funding in the large number of collective proceedings before the Competition Appeal Tribunal has generated scrutiny. This article examines the economic rationale for litigation funding, briefly considering both its benefits – such as improved access to justice and efficient claim selection – and three supposed concerns: the system benefits funders more than consumers, leads to excessive litigation and creates conflicts of interest between funders and claimants. These concerns do not always have a strong economic basis, but, in some instances, they do. Where they do, it is essential that the Tribunal continues to play an important role in scrutinizing funding arrangements as a helpful corrective.