Group proceedings could open up more opportunities for small businesses - Nicola Ross

Massive fast fashion brands, like Pretty Little Thing and Shein, have been accused of “stealing” small designer’s intellectual property after those small designers showcased their designs via TikTok. Most of these allegations never lead to legal action. This could be for many reasons, although we do know that most small businesses lack the capital to raise a claim against a large corporation and potentially lose out as a result.

On its own, a small business challenging a larger corporation can be incredibly risky. From the cost and fees of lawyers to the time spent building a case, this is capital that could instead be put towards bolstering growth and profits.

Fortunately, the introduction of group proceedings in Scotland in 2020, better known as class actions in England and Wales, allows several parties to unite by raising a claim under one legal action. This type of case can provide small business owners with the opportunity to take swift legal action without battling barriers such as lack of funds or time.

For small business owners considering taking legal action against a much larger business, there are several benefits that group proceedings can open up:

​Nicola Ross, Partner in the Litigation and Dispute Resolution team at Morton Fraser

Cost efficiency

With a typical legal action, an individual pays their share of the overall cost. But the benefit is that with group proceedings, litigation costs can be spread evenly across all parties involved. So, the more people involved, the lower each individual contribution will be.

Alongside the potential to spread costings, claimants may also secure some form of litigation funding to assist in their group litigation, or benefit from a “no win, no fee” style claim depending on their solicitor. For those involved, this will save valuable funds that can be reinvested back into their business.

Safety in numbers

Group proceedings can allow small businesses to take swift legal action (Picture: rogerphoto - stock.adobe.com)

Taking action against a larger, and usually more established, company can be incredibly daunting for a small business, especially when larger businesses typically have more resources at their disposal to combat legal action. Through combining their efforts alongside other claimants, small businesses can create a sense of security as no one individual is the face of the claim.

Like the equal spread of cost, effort and time can be divided evenly across all small businesses involved so no one individual is consumed by the process. By doing so, small businesses are able to reserve vital time and energy that can be saved for their typical day to day operations.

Generates exposure

Another pro for group proceedings comes in the form of publicity and media awareness. When small businesses band together with a similar claim against a larger corporation, the media tends to take notice, which can help to garner support for the case.

We saw examples of this with business interruption insurance claims - where certain insurers refused to pay out for losses caused by the COVID pandemic and lots of impacted businesses, particularly those in the hospitality sector, grouped together and attracted much more press attention than they might have done on their own.

Media interest can lead to public interest, particularly on social media. In the right circumstances, this scrutiny from the public could result in faster resolution of a legal action as large companies may attempt to settle the claim quickly to avoid or minimise any potential damage to its brand or sales.

As we can see, group proceedings open up more opportunities for small businesses in Scotland. They not only provide small businesses with greater confidence going into a legal battle, but also have the potential to share the financial and non-financial burden of defending their rights against larger corporations.