Earlier this month, the Federal Trade Commission released findings from two studies regarding the effectiveness of class settlement notices. According to the FTC, these are the most comprehensive notice studies that have been conducted to date.

• In the Administrator Study, the FTC issued subpoenas to seven of the largest nationwide class action administrators and analyzed information on claims rates based on different notice factors. In the Notice Study, the FTC contracted with a consumer research firm to analyze how variations in email characteristics impacted opening and response rates among 8,000 mock notice recipients.
• Under the Administrator Study, the median calculated claims rate across all 149 consumer class actions studied was 9%.
  • Somewhat surprisingly, the claims rate did not correlate with the amount of potential compensation. At the same time, the check cashing rate was higher for larger compensation amounts.
  • The claims rate increased when the notices used “plain English,” particularly in describing potential compensation with words such as “payment,” “money,” “cash,” etc.
  • Claims rates were higher when notice packets with enclosed claim forms were mailed as opposed to postcards or emails (10% versus 6% and 3%, respectively). Postcards with detachable claim forms had claims rates twice as high as those without claim forms.
  • Across all 149 class action settlements studied, only 0.01% of notice recipients affirmatively excluded themselves from a class action, and only 0.0003% objected to the terms of the settlement.
• According to the Notice Study, less than half of respondents said they were likely to open a class action settlement email, regardless of sender and subject line.
  • Emails with subject lines omitting any reference to a class action had the highest opening rates. Including the amount of compensation in the subject line significantly decreased the opening rate, as respondents indicated they viewed those emails as likely spam.
  • Long-form emails with formal legal writing improved recipients’ understanding of the nature of the email, but shorter, bulleted emails made it easier for recipients to understand what was required of them to pursue a claim.
  • The subject line “Notice of Refund” had substantially higher opening rates than other subject lines, but longer subject lines containing more information about the class action settlement led to higher comprehension rates as to what the email was and why it was received—suggesting a trade-off between opening rate and comprehension rate.
• Given the absence of reliable (and publicly available) data on the issues addressed in the FTC Staff Report, it is likely that these studies will play a significant role in how courts review proposed settlement notice plans. The Report should therefore be considered by class action litigants when negotiating class-action settlements, evaluating settlement notice forms and plans, and defending proposed settlements in court.

The full FTC Staff Report, “Consumers and Class Actions: A Retrospective and Analysis of Settlement Campaigns,” can be read here.