Competition Appeal Tribunal blocks £14bn class action against MasterCard

The case, brought on behalf of a class of 45 million British consumers, was one of the first to be filed before the CAT under new collective actions rules. The Consumer Rights Act 2015 brought in a new procedural framework allowing a class action to be filed on behalf of a group that has suffered damages under competition law.

Former financial ombudsman Walter Merricks had applied to spearhead the class action on behalf of consumers who are alleged to have lost money as a result of charges on the use of debit and credit cards imposed by MasterCard. The applicants said that the interchange fees, which are charges imposed on retailers for the cost of processing of credit and debit card payment transactions, resulted in higher prices for consumers over a period of 16 years.

The applicants put the value of this loss at £14bn and while the CAT said this figure was “almost certainly an overestimate”, it agreed that the applicants sought “recovery of a very substantial sum”.

After hearing expert evidence on the amount of compensation claimed, the CAT decided (56 page / 286KB PDF) the claims were not suitable for an aggregate award of damages, and that there was “no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant”.

The ruling follows the withdrawal in June of the first “opt-out” class action claim filed with the CAT. Claimant National Pensioners Convention (NPC) general secretary Dot Gibson withdrew the claim against Pride Mobility Products after deciding it was not worth enough money to proceed.

Competition law expert Ben Lasserson of Pinsent Masons, the law firm behind Out-Law.com, said: "Whilst this CAT decision means that both of the attempts so far to bring a collective action under the new rules have failed, it is very important to recognise that both those claims are arguably extreme examples. In other words, there is no reason to think that the CAT's forensic and restrictive approach to certification will necessarily shut out other collective claims in the future."

Although this consumer claim has been blocked, MasterCard continues to face a number of claims from retailers in the High Court of England and Wales and the CAT. 

The issue of interchange fees was previously investigated by the Competition and Markets Authority, but the investigation was halted in late 2014. Last year MasterCard told the US Securities and Exchange Commission it could face costs of $270 million to settle damages claims from UK merchants over the fees.

The EU brought Interchange Fee Regulation (IFR) into force in April 2015, imposing new caps on interchange fees. Debit cards used cross-border and domestically are now subject to a cap of 0.2% of the transaction value, with a cap of 0.3% of transaction value on credit cards.