Mass Claim Against MasterCard in UK is Given a Second Chance at Certification

What has happened?

On 16 April 2019, the Court of Appeal issued a ruling that gives a second chance at certification to the £14 billion mass consumer claim brought against MasterCard by Walter Merricks. The ruling breathes new life into the claim and into the UK’s nascent opt-out class action regime.

Merricks, a former consumer ombudsman, is claiming damages on behalf of 46 million UK MasterCard credit and debit card users. The proposed class allegedly suffered illegal overcharges as a result of MasterCard’s ‘multilateral interchange fees’ (MIFs) over a period of 18 years. In 2007, the Commission found that these fees infringed EU antitrust rules – a finding confirmed by the EU Court of Justice in 2014.

However, in July 2017, the consumer claim failed to clear its first hurdle, when the Competition Appeal Tribunal (CAT) refused to grant a collective proceedings order (CPO) – the equivalent of class certification. The CAT did so on the grounds that the claimants had failed to show: (i) “common issues” uniting the class of claimants, since it could not be demonstrated that the extent to which overcharges were passed on to individual claimants was the same; and (ii) that the claim was “suitable for collective proceedings”, since the proposed methodology for calculation and distribution of damages was too crude to account for variations in the losses suffered by different individuals. There followed a series of legal challenges by Merricks, who argued before the Court of Appeal that the CAT’s approach to certification had been too strict.

The Court of Appeal allowed Merricks’ appeal, and set aside the CAT’s prior judgment refusing a CPO. The appellate court held that, given the early stage of certification, the CAT had indeed imposed too strict a standard when assessing whether the test for granting a CPO had been met:

  • Common issues: the CAT was wrong to require that the amount of overcharge should be common to all claimants “when what is claimed is an aggregate award. Pass-on to consumers generally satisfies the test of commonality of issues necessary for certification”;
  • Suitability for collective proceedings: the CAT was wrong to require evidence of a damages distribution methodology that would accurately compensate each member of the class: “it was both premature and wrong for the CAT to have refused certification by reference to the proposed method of distribution: an error compounded by their view that distribution must be capable of being carried out by some means which corresponds to individual loss”.

The case will be remitted to the CAT, which will once more have to decide whether to certify the claim – this time taking into account the Court of Appeal’s findings.

Why does this matter?

The ruling gives fresh momentum to the UK’s nascent regime for opt-out collective proceedings, which was introduced by the Consumer Rights Act 2015. The regime allows a class representative to seek redress on behalf of an identifiable class of persons, without the need for individuals to sign up to the proceedings. However, its viability was in doubt after the first two claims both failed at the certification stage.

In March 2017, the CAT’s judgment in Dorothy Gibson v. Pride Mobility Products, in effect, reduced the eligible class (of mobility scooter customers) to less than 950 members. As a result, the claim was subsequently withdrawn. In July 2017, the CAT refused to grant the CPO in Walter Hugh Merricks v MasterCard. The CAT’s strict approach, particularly in Merricks, cast doubt on the prospects of bringing a successful opt-out claim.

By contrast, the Court of Appeal’s judgment in Merricks strikes a very different tone, and greatly improves the prospects of success of this and future claims.

What happens next?

MasterCard intends to seek permission to appeal the ruling directly to the UK Supreme Court. Subject to that possible appeal, the CAT will now have to reconsider the question of class certification. In the meantime, MasterCard continues to face a number of other MIF-related claims by merchants.

Aside from Merricks, there are two more pending opt-out collective proceedings, including a Trucks cartel-related follow-on claim brought on behalf of haulage operators, and a stand-alone claim against two train operating companies brought on behalf of passengers.

How can Cadwalader help?

Cadwalader’s antitrust team is one of only a few to focus on the financial services sector. We regularly represent companies before the EU, UK and US antitrust authorities, and are specialists in offering ‘end-to-end’ advice on antitrust investigations and related litigation in this sector, working closely with our financial regulatory and white collar colleagues.

If you would like to discuss the issues arising in this alert, or how we can help you more generally, please contact Vincent Brophy and Tom Bainbridge.

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