The Confederation of British Industry has warned that government proposals to reform competition law, making it easier to bring action against firms in breach, could “fuel” claims and “create a new business in collective litigation.”

Earlier this week the Department for Business, Innovation and Skills published a consultation which introduces an opt-out procedure for businesses and consumers bringing actions for shared losses caused by companies acting in an anti-competitive manner.

The proposed reforms are set to allow the Competition Appeal Tribunal to hear more kinds of competition cases, whilst it will also have additional powers to allow small and medium-sized enterprises to challenge behaviour that is restricting their ability to grow; which the government says will promote alternative dispute resolution to ensure courts are the option of last resort.

It is also claimed by the government that the reforms will also ensure that private actions complement the public enforcement regime, in particular by protecting incentives for companies to blow the whistle on cartels.

Norman Lamb, the Business Minister, said of the reforms: “Our main aim for these reforms is to promote fairness and act as a further deterrent for firms behaving anti-competitively.

“Small businesses and consumers will be better equipped to represent their own interests, stop anti-competitive behaviour and seek redress if they have suffered loss.”

Although the proposals have been widely accepted, CBI director for competitive markets, Matthew Fell, has aired concern, saying the group is ‘extremely concerned’ by the government’s preference towards opt-out class actions; which he believes would magnify the total amount of potential claims and fuel litigation.

He added: “Opt-out actions will be inextricably linked with third-party investors and as a result are likely to create a new business in collective litigation, which is not the sort of industry we want to encourage in the UK.”