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The Mastercard Class Action Case: An Update

Last December, I wrote a blog article regarding the ongoing Mastercard class action case. One year later, this post will look at the latest developments in the case and their wider implications.

Merricks v Mastercard: a quick recap

In 2016, Walter Merricks attempted to bring collective proceedings for damages against Mastercard. Serving as the authorised class representative on behalf of over 46 million consumers, he claimed that Mastercard charged excessive ‘interchange’ fees between May 1992 and June 2008, and that these fees were passed on to consumers via increased prices charged by retailers. In 2017, the Competition Appeal Tribunal (henceforth, CAT) rejected Merricks’ bid. However, in December 2020, the Supreme Court returned the collective proceedings order (henceforth, CPO) to the CAT for reconsideration, ruling that the CAT had made five errors of law in arriving at its decision.

A class action is a type of lawsuit in which one of the parties consists of a group of people that is represented collectively by a member (or members) of that group (in this case, Merricks). An ‘opt-out’ class action does not require class members to take any steps to opt into the claim. According to UK law, a CPO is a prerequisite for ‘opt-out’ class actions seeking damages for breaches of competition law. In order to issue a CPO, the CAT must be satisfied that it is both just and reasonable that the individual seeking to act as the representative (i.e., Merricks) is authorised to do so, and that the claims are eligible for inclusion in collective proceedings.

Latest developments

In August 2021, following a re-hearing in March, the Competition Authority conditionally granted Merricks a CPO against Mastercard on amended terms from Merricks’ original application. The CAT allowed Mastercard to narrow the scope of the class action by excluding claims on behalf of deceased persons and compound interest on damages.

Firstly, Merricks sought to amend the proposed class definition to include ‘persons who have since died’, which would have increased the class size by approximately 29%. The CAT refused to grant permission to amend the claim form in such a way, as the claim treated deceased persons as individuals within the class, which is different to the principle that representatives of deceased persons’ estates can be included in collective proceedings. Furthermore, given that the limitation period had already expired, attempts to add such representatives as new class members in the proceedings would not have been possible.

Secondly, Merricks argued that without Mastercard’s alleged interchange fee ‘overcharge’, class members would have had more funds available to reduce their debts and/or earn interest through deposits or investments of the overcharge. As of January 2021, the interest relating to the claim amounted to £6.6bn (using simple interest) or £8.8bn (using compound interest). Therefore, this claim for compound interest accounted for approximately £2.2bn of the total claim. However, the CAT found that, contrary to the aggregate claim for the overcharge, Merricks lacked a ‘credible or plausible method of estimating what loss by way of compound interest was suffered on an aggregate basis’. As a result, the claim was excluded. Moreover, the CAT noted that even if compound interests were included, it would be difficult to observe how this claim could raise a ‘common issue’ across the entire class. On average, a class member’s loss was estimated to be approximately £10 per year, so it was deemed not readily inferable that the money would not simply have been spent.

How does Mastercard view the results of the hearing?

Mastercard still insists that Merricks’ ‘speculative’ and ‘fundamentally misconceived’ claim has been driven by lawyers and backed by organisations ‘primarily focused on making money for themselves’, and has stated that it ‘will continue to oppose [the claim]’. Mastercard has also highlighted failed attempts by class action lawyers in the US to bring almost identical claims against it.

Mastercard is represented by Freshfields Bruckhaus Deringer. Freshfields partner, Mark Samson, has suggested that the latest judgement was a ‘win’ for Mastercard, as it reduces the value of the claim by over £5bn (or 35%). Samson explained that the judgement related to issues that centred on claiming on behalf of deceased people and for compound interest, and not whether or not the claim would be certified. This reflects the fact that the CPO order was uncontested, suggesting that Mastercard anticipated that the CAT would certify the case.

What’s the significance?

Firstly, the CAT’s ruling enables the UK’s first and largest ‘opt-out’ antitrust damages class action case to proceed to trial on substantive legal issues. Since the collective proceedings regime for UK competition law has only been recently introduced by the Consumer Rights Act 2015, there have been limited opportunities to launch such proceedings. As suggested by Gareth Shaw, head of money at Which?, the judgement ‘could open the door for many other cases to follow suit’.

An interesting development that occurred after the August 2021 ruling is the UK Supreme Court’s rejection of the class action claim in Lloyd v Google. Lloyd’s team argued that Google was secretly tracking the internet activity of a proposed class of four million iPhone users in England and Wales between 2011 and 2012. This non-competition claim is not covered by the regime introduced in 2015, and thus demonstrates an alternative class action mechanism. According to legal commentators, the rejection by the Supreme Court means that it is unlikely that similar group privacy claims will proceed.

Secondly, and especially relevant for pending class action cases, the CAT’s ruling highlights the potential proactive and rigorous role of the CAT in considering the approval of CPOs and, if approved, their appropriate scope. It specifically ‘provides valuable guidance on the CAT’s approach to issues around class definition and litigation funding’. This is of interest to high value ‘opt-out’ CPO applications that are currently awaiting determination by the CAT, including the ‘Boundary Fares’ case (which concerns the costs of boundary tickets paid by rail users) and the Trucks cartel claims (that will require the CAT to investigate the line between ‘opt-in’ and ‘opt-out’ claims). It is also relevant for the very recent hearing at the CAT regarding whether a CPO can be launched with a potential pay-out of £150m to car buyers over an alleged automobile cartel. Now that the Merricks v Mastercard case is moving beyond the certification stage, there will be ‘significant attention paid to the proceedings adopted by the CAT’.

Thirdly, it highlights the opportunity for defendants to use the CPO certification hearing before the CAT to ‘narrow the class definition and reduce the aggregate damages sought’. Although the Mastercard class action case is unusually large financially, it illustrates the ability for defendants to reduce potential damages exposure and litigation costs, which is relevant for class action cases of all sizes.

What’s next?

Looking forward, as highlighted by Emilie Jones of Pinset Masons, it will be interesting to see how much of the £12bn claimed in the Mastercard case is actually distributed to consumers if successful. This will provide an indication of the effectiveness of ‘opt-out’ procedures in delivering customer redress. Given the potential pay-out to a huge number of people, the fact that this case has already been in the works for over four years, and that it is significant for subsequent class action cases, its progress is of fundamental importance.


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