Mastercard ruling: ‘new era’ for UK collective actions

In July 2017, the Competition Appeal Tribunal (CAT) declined to grant a collective proceedings order (CPO) in a claim against Mastercard, brought by former financial ombudsman Walter Merricks, under new collective action rules introduced by the 2015 Consumer Rights Act. Merricks has claimed that 46.2 million UK consumers lost money as a result of ‘interchange fees’ imposed by Mastercard on the use of debit and credit cards between 22 May 1992 and 21 June 2008.

The Supreme Court’s judgment follows that of the Court of Appeal last year, overturning the CAT’s ruling that the case was not “suitable” for hearing under the collective proceedings regime. The Supreme Court ruled that the CAT had made five errors of law in arriving at its decision, and has returned Merricks’ CPO application to the CAT for reconsideration.

Pinsent Masons competition law expert Alan Davis said that the “landmark” judgment “breathes new life into the UK’s fledgling regime for opt-out antitrust mass actions”.

“By confirming a lower initial threshold for class action certification, siding with the Court of Appeal on a less demanding approach to the issues of pass-on and distribution of damages, the juggernaut Merricks claim - and other consumer mass actions that have been waiting in the wings pending the Supreme Court’s ruling - will be able to more easily move past the initial procedural step of obtaining a CPO,” he said.

“However, while the Supreme Court’s ruling rejects the ‘mini trial’ approach at the certification stage that the CAT favoured, class action representatives and funders will be mindful of potentially significant costs exposure if the CPO is revoked at a later stage of the litigation process. Opt-out collective proceedings that clear the initial CPO hurdle will need to grapple with complex economic and other expert evidence at the substantive trial. Given the complexity of the issues yet to be determined - and the high stakes involved - it may still be years before the UK’s first antitrust opt-out mass action case is conclusively decided,” he said.

The CAT has exclusive jurisdiction over the collective proceedings regime. However, before such a claim can proceed, the CAT must first ‘certify’ the claim by issuing a CPO. Before issuing a CPO, the CAT must be satisfied that it is just and reasonable that the individual seeking to act as representative to be authorised to do so; and that the claims are eligible for inclusion in collective proceedings. The CAT may revoke a CPO, and so terminate the collective proceedings, at any stage.

While the CAT accepted that it was reasonable for Merricks to act as representative, it found that the claims were not eligible for collective proceedings. It did so on two grounds: that the claims were not suitable for an aggregate award of damages; and that there was no way to apportion any damages award in such a way as to properly compensate affected consumers.

The Supreme Court, for reasons “largely but not entirely” consistent with those of the Court of Appeal, found that the CAT was incorrect to refuse certification. It confirmed the Court of Appeal’s finding that the CAT was incorrect to decide that a CPO was not appropriate because the extent to which the overcharge was passed on to consumers, if at all, would differ as between merchants and therefore was not a  'common issue'. The CAT had also placed too much weight on its decision that the case was not suitable for aggregate damages; and it should have applied a test of “relative” suitability, taking into account whether individual proceedings were a relevant alternative.

More significantly, according to the Supreme Court, the CAT was wrong to conclude that difficulty in quantifying loss was a good reason to refuse certification; and that Merricks should be able to demonstrate that damages would be distributed in such a way as to take account of the loss suffered by each individual member of the class action.

“The fact that data is likely to turn out to be incomplete and difficult to interpret, and that its assembly may involve burdensome and expensive processes of disclosure are not good reasons for a court or tribunal refusing a trial to an individual or to a large class who have a reasonable prospect of showing they have suffered some loss from an already established breach of statutory duty,” said Lord Briggs, giving the judgment of the court. “The present case may well present difficulties of those kinds on a grand scale, but they are difficulties which the CAT is probably uniquely qualified to surmount.”

He added: “A central purpose of the power to award aggregate damages in collective proceedings is to avoid the need for individual assessment of loss … In many cases the selection of the fairest method [of distribution] will best be left until the size of the class and the amount of the aggregate damages are known”.