August 03, 2017

What MasterCard's Victory Means for the Future of U.K. Class Actions

Heralded as the new dawn for private competition litigation, the Consumer Rights Act 2015 introduced a procedural mechanism for collective proceedings — “class actions” — in the U.K. However, to date, only two applications for collective proceedings have been made, both of which have failed.

In order to bring such proceedings, a collective proceedings order (CPO) must be obtained from the Competition Appeal Tribunal (CAT). To be entitled to a CPO the CAT must:

  1. Authorise the person bringing the proceedings to act as the class representative.
  2. Be satisfied that the proceedings are eligible proceedings, meaning: (i) that the proceedings raise the same, similar or related issues of fact or law; and (ii) are suitable to be brought in collective proceedings.

Background

In December 2007, the European Commission found that MasterCard’s multilateral interchange fees — the fees charged by MasterCard to consumers and paid by the merchant bank for processing a payment card transaction — breached EU competition law. This decision was upheld by the Court of Justice of the European Union (on appeal by MasterCard) in September 2014.

Merricks v MasterCard

In a follow-on action for damages, Mr Walter Hugh Merricks CBE applied for a CPO on behalf of a class of 46.2 million individuals who, between May 1992 and June 2008, purchased goods and/or services from businesses selling in the U.K. that accepted MasterCard cards, at a time at which those individuals were both: (1) resident in the U.K. for a continuous period of at least three months, and (2) aged 16 years or over.

Merricks sought an aggregate award of damages for the class, broadly estimated at £14 billion, which would then be distributed to the class members.

The CAT considered whether Merricks’ claims were “suitable to be brought in collective proceedings”. In conducting this analysis, the CAT had to determine whether Merricks had put forward: “(1) a sustainable methodology which can be applied in practice to calculate a sum which reflects an aggregate of individual claims for damages, and (2) a reasonable and practicable means for estimating the individual loss which can be used as the basis for distribution”.1

Regarding methodology, the CAT was “unpersuaded on the material before us that there is sufficient data available for this methodology to be applied on a sufficiently sound basis”.2 As for distribution, the CAT explained that “The problem in the present case is that there is no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant from the aggregate loss calculated according to the Applicant’s proposed method”.3

Accordingly, the CAT found that Merricks’ claims were not suitable to be brought in collective proceedings and dismissed the application for a CPO.

What Next?

Being one of the first cases to seek a CPO, Merricks’ claim was always going to face difficulties. As more requests come before the CAT, one of the great advantages of the English common law system is that the law will develop and become clearer. Merricks’ claim has done much to further and clarify the law on CPOs.

This case ultimately failed due to the diversity of the class and the uncertainty on the amount of damages sustained by each individual class member. This led the CAT to question whether there was sufficient commonality to allow a CPO.

It follows that future claims will likely focus on products and services that are more homogenous and in which it is easier to administer the distribution of damages. It will be interesting to see how this change to the U.K.’s legal landscape is affected by the difficulties faced in Merricks’ claim.

1 [2017] CAT 16 [67]
2 [2017] CAT 16 [78]
3 [2017] CAT 16 [84]

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