What the Cost of The American Tort System Means for the Collective Redress Debate

28th Feb 2019

New data from the U.S. Chamber Institute for Legal Reform found a stunning result: costs and compensation paid into the U.S. tort system totaled $429 billion in 2016. That’s over €377 billion, which is more than double the entire budget of the European Union.

EU officials should be concerned by this data as the debate over a union-wide collective action system continues. Known as class actions in the United States, these lawsuits have been a big reason for the huge price tag of the U.S. system. Lawyers earned an average of $1 million in fees in class action litigation, while consumers walk away with almost nothing. The U.S. Consumer Financial Protection Bureau found that 87 per cent of the class actions they examined resulted in no consumer benefit at all. Those who did get something walked away with only about $32.

This has become a deeply unpopular system in the U.S. Eight-in-ten American consumers think the number of lawsuits in the U.S. is a serious problem. Another 87 per cent think that claimant’s lawyers file too many lawsuits, and that new legislation is needed. They’re right to feel this way. That same piece of research broke down the $429 billion overall number into a per household cost. Lawsuits cost American families an average of $3,330 each year in the form of higher prices for everyday goods and services.

These stats are sobering. Policymakers should use caution before they introduce U.S.-like litigation features to the EU. Check out all of these stats, and more, by clicking here.