The Federal Trade Commission recently released its preliminary report on two studies it conducted to help understand the effectiveness of class action settlement notices and to “develop information to help improve settlement outcomes for consumers.” The report shows that claims rates, regardless of the form of notice, are very low and that some of the more costly forms of notice, like publications in magazines and national newspapers, do not significantly increase the claims rate. The FTC did, however, identify certain characteristics contained in emails (the least expensive form of notice) that improved open rates and consumers’ comprehension of notices. Regardless, consumers’ comprehension of the emails was very low—less than half. The FTC noted that the results suggest that consumers view class action settlement notices with healthy skepticism.
The FTC performed the studies as part of its Class Action Fairness Project. The initiative strives to make sure class settlements provide appropriate benefits to consumers. Importantly, the FTC, a consumer protection agency, made no effort as part of these studies to determine if the underlying claims had merit, if the settlements were fair under the circumstance of the case, or if the people receiving notices would have been entitled to any compensation had they brought their own lawsuit.
For more information about the studies and our thoughts on the FTC’s conclusions, see our legal alert.