Australian class action trends: AI could be next battleground

Australia mirrors the US in class action trends, and AI washing cases could be on the rise, lawyers and experts say.

MinterEllison partners Beverley Newbold and David Taylor say trends in Australian class actions tend to mirror those in the US. Picture: Hollie Adams.

The next wave of shareholder class actions in Australia is likely to follow a US trend and come from investors taking on companies that have misled the market about their use of artificial intelligence, industry experts say.

They also expect a ramp-up in competition claims.

MinterEllison partner Beverley Newbold said while AI ­remained an exciting tool for boosting efficiency, some US class actions have alleged that certain companies might have overstated the benefits of it or misstated whether it has been used at all.

“There has been a few class ­actions in the US, for example. They include claims against entities that while representing that they used AI, in fact used manual labour for certain things,” she told The Australian.

“There are also shareholder class actions against tech companies who represented their products had AI features which they did not, or that would deliver benefits that it did not.

“That type of action has not happened in Australia, but often the promoters of these actions in Australia closely follow trends in the US to see if there is an application here.”

MinterEllison partner Beverley Newbold says trends in Australia's class action landscape tend to mirror those in the US.

The practice of misleading or deceiving the market by boosting your AI credentials has become known as “AI washing”.

University of NSW faculty of law professor Michael Legg said potential AI washing cases had been raised with him.

“(AI washing) is a more specific type of misleading and deceptive conduct in the sense that people will try to attract investments or sell products to consumers by making representations about it containing some form of artificial intelligence,” he said.

Apple is facing a class action in the US for false advertising and unfair competition, amid allegations that the marketing campaign for the iPhone 16 and new iPad and MacBookPro overstated the company’s Apple “intelligence” features, including its enhanced Siri powered by AI.

Law firm Clarkson partner Tim Giordano said in a statement about that action that “what we are witnessing is AI-washing”.

Ms Newbold said another category of class actions in the US that was increasing significantly, and which might be replicated in Australia, were matters involving antitrust or competition allegations, with about 340 of those matters filed last year.

“They look at monopolistic power in certain industries. Quite often they relate to the tech industry, but also food industries as well,” she said. “It might be that they’re a little more attractive in the US because plaintiffs have access to treble damages regimes in a way that we don’t have here.

“And also just the sheer number, population wise, of consumers in the US means there’ll ­always be a critical mass which better economically justifies these class actions, but there’ve only been a few in Australia.”

MinterEllison partner David Taylor.

Professor Legg also agreed ­actions involving PFAS, also known as “forever chemicals” used in packaging and on items making them resistant to stains and heat, could increase.

Partner David Taylor said some class actions were emerging that were unique to Australia, such as sexual harassment and discrimination claims in the mining and resources sector.

“Those are actions that allege a particular harm to an individual, often with terrible circumstances referenced, but then use that as a sort of springboard to allege the existence of policies that may have failed more broadly across an organisation or organisations for a huge number of years,” he said.

“Those cases are in their infancy. (It will be interesting to note) if they can survive class ­action commonality challenges, and secondly whether they are capable of generating damages.”

Landmark class actions have been brought against two of Australia’s biggest mining companies, Rio Tinto and BHP, alleging female workers were subjected to sexual harassment and abuse.

While litigation funders eye categories of class actions that are emerging in the US, Mr Taylor said shareholder loss actions – relating to market disclosure matters – could make a resurgence in the market after a string of unsuccessful judgments cautioned ­potential funders and group members away.

He said there was a surge of class actions filed in the 10 years to about 2022, and most were shareholder actions.

“For a long while shareholder class actions would settle without any guidance from the courts, everyone was nervous as to where the law would land,” he said.

“And that was really what was driving the industry.”

A shareholder class action against Myer was the first shareholder action to yield a final judgment, in 2019, and it was unsuccessful because the Federal Court was not satisfied group members actually suffered any loss.

But now there is a pathway as to how the cases can be pleaded, Mr Taylor said. “It’s going to take a bit of time to get it right, but there’s enough guidance out there now on how to plead these out successfully.”

Originally published as Australian class action trends: AI could be next battleground