FTC Seeks to Study Class Action Settlements

To study of the effectiveness of various class action settlement notice programs, the Federal Trade Commission has issued orders to eight claims administrators, requiring them to provide information on procedures they use to notify class members about settlements and the response rates for various methods of notification.

The orders are part of the Commission’s Class Action Fairness Project, which strives to ensure that class action settlements in consumer protection and competition matters provide appropriate benefits to consumers. Under the project, the FTC monitors class actions and files amicus briefs or intervenes in appropriate cases; coordinates with state, federal, and private groups on important class action issues; and monitors the progress of legislation and class action rule changes.

Also included in the project are two proposed studies: the Notice Study, which examines consumer perception and understanding of class action notices and the options they provide to consumers, and the Deciding Factors Study, which analyzes factors that influence consumers’ decisions to participate, opt out of, or object to a class action settlement. The initial comment periods for both studies required by the Paperwork Reduction Act have closed. The Commission will use these studies to guide the Class Action Fairness Project.

The Commission vote to issue orders to file a special report was 3-0. The Commission is authorized to issue these orders by Section 6(b) of the FTC Act. (FTC File No P024210; the staff contacts are Robin Moore, Division of Enforcement, 202-326-2167 or Colin MacDonald, Division of Enforcement, 202-326-3192.)

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