Supreme Court paves way for UK collective actions in landmark Merricks v Mastercard decision

In its much-anticipated judgment in Walter Merricks CBE v Mastercard Incorporated & Ors [2020] UKSC 51, the Supreme Court has significantly lowered the initial certification hurdle that applicants for a collective proceedings order (“CPO”) must overcome before their private damages claims in antitrust proceedings can be commenced.

The Supreme Court judgment means that the Competition Appeals Tribunal (“CAT”) is likely to look favourably at CPO applications which involve claims that can be brought more effectively collectively than individually, even if it involves doing damage to the principle that claimants should be compensated for their actual loss and no more. This means that the potential consequences of a competition infringement are even more severe, with infringers likely to face collective actions, potentially at multiple levels of the supply chain.

Development of the UK’s collective action regime

The Consumer Rights Act 2015 significantly changed the UK procedural landscape for private damages claims in antitrust proceedings by introducing a collective action regime. Since 1 October 2015, the CAT has had the power to grant a CPO on an “opt-in” or an “opt-out” basis in appropriate cases which combine two or more stand-alone claims or follow-on claims in respect of alleged cartels or for abuse of dominance.

The Merricks collective action

This case concerns Mastercard’s default multilateral interchange fee, a fee charged by the cardholder’s bank to the merchant’s bank when a consumer pays for goods or services using a Mastercard payment card. That fee is “passed-on” entirely to merchants by their banks as part of the charge they pay for payment services and, in December 2007, was held to be unlawful by the European Commission as it restricted competition in breach of EU competition law.

In September 2016, Walter Merricks CBE (“Merricks”), acting as class representative, issued follow-on proceedings in the CAT against Mastercard on an opt-out basis on behalf of an estimated 46.2 million individuals who had purchased goods or services between 22 May 1992 and 21 June 2008 from businesses in the UK which accepted Mastercard payment cards. Merricks alleges that the unlawful MIF was passed on to consumers entirely (or near entirely) and that, absent Mastercard’s infringement, all consumers would have paid lower prices during the claim period. He seeks an aggregate award of damages for this overcharge, together with interest, totalling more than £14 billion – the largest civil damages claim of any sort ever brought in the UK.

The three court judgments so far

In July 2017 the CAT refused to grant a CPO to allow the case to continue on a number of legal and practical bases. However, the Court of Appeal set aside the CAT’s order, holding that the CAT erred in law and adopted the wrong approach to the assessment of the evidence and the strength of the case on pass-on, and had adopted the wrong test in relation to distribution. These two decisions are discussed in detail in our previous alert: The Court of Appeal reverses the CAT’s first instance Mastercard decision in landmark collective action ruling.

The Supreme Court has now (largely) upheld the decision of the Court of Appeal, finding that the CAT made a number of errors in its original assessment of whether to grant certification. It has sent the proceedings back to the CAT for further consideration of whether a CPO should be granted, with the hearing in the CAT scheduled for 25-26 March 2021.

Conclusions and the future of the collective action regime

The Supreme Court’s decision to remit Merricks to the CAT for a re-hearing will undoubtedly be welcome news to claimants and litigation funders. The Supreme Court’s judgment supports the Court of Appeal’s decision to significantly lower the initial certification hurdle that CPO applicants must overcome. It does, however, have some difficult implications, including that there may now be a risk that collective proceedings will be exploited opportunistically by claimants to extract settlements from defendants when they otherwise would not be able to establish a different form of claim.

Nonetheless, the judgment will be highly influential on the CAT’s approach in relation to the other pending CPO applications before it, which is expected, in turn, to generate further guidance on the operation of the new regime. It will also undoubtedly serve to encourage claimants and litigation funders in proceedings not already underway, particularly given that it represents the first consideration of the new class action regime by the Supreme Court.