The Irish Small and Medium Enterprises Association (ISME) has criticised the government’s Defamation (Amendment) Bill 2024, which it says does not go far enough to protect small businesses from defamation claims.

It says current defamation laws are making life extremely challenging for SMEs, particularly in the retail and hospitality sectors, where businesses face an increasing volume of defamation threats and cases.

Neil McDonnell, chief executive of ISME, said: “Ireland’s defamation laws are not fit for purpose. SMEs are being forced to settle cases they should never have faced in the first place, simply to avoid exorbitant legal costs.

“This has created a legal climate where defamation is a lucrative business for a small number of lawyers, while businesses, citizens and the media suffer.

“The government must introduce stronger protections to prevent abuse of the system and to safeguard SME livelihoods.”

ISME also claims that solicitors are “using defamation threats to silence complaints made to the Legal Services Regulatory Authority (LSRA), with no action taken to prevent this abuse”.

The lobby group says retailers and SMEs cannot afford to fight defamation cases, and even those who win rarely recover their costs.

Most cases settle for between €5,000 and €7,000, with legal teams receiving €20,000 to €30,000 in fees, according to ISME.

The group says the absence of a harm test will allow “abusive, vexatious and trivial” claims to continue, and will render the bill a “legislative dead letter”.

It proposes that general damages should be capped at €75,000 to bring defamation awards within the jurisdiction of the Circuit Court, though adds that awards could exceed Supreme Court guidance where harm is demonstrated by plaintiffs.

The group also wants to see stronger provisions in the bill to protect victims of sexual assault and rape from being “muzzled by perpetrators”, explicit protections for satire and comedy, and changes to bring it in line with the requirements of EU SLAPP rules.

Mr McDonnell said: “The threat of legal action has led to widespread implementation of a ‘no challenge’ policy in retail, where businesses refrain from protecting stock for fear of defamation claims.

“One major Irish grocery operator budgets a loss of €70k-€90k annually for each of its convenience stores and €120k-€140k for its supermarkets.

“A case study from an ISME member details how a licenced premises successfully defended a defamation claim in the Circuit Court, only to face a High Court appeal threat unless they agreed to cover the plaintiff’s legal costs.

“The business ultimately had to pay €3,000 in the settlement and absorb €12,375 in legal fees, with a subsequent rise in their insurance premium.

“This case underscores how the system incentivises legal threats against SMEs, regardless of merit.

“Rule of law does not mean rule by lawyers. It is time for the Dáil to assert itself in legislative terms, and stop abusive and vexatious defamation litigation, which offends the Irish constitutional right to express opinion, and the European Convention on Human Rights.”