In a landmark ruling the Court of Appeal has given another chance to a £14 billion class action against MasterCard.
The first case of its kind, brought on behalf of 46 million UK consumers, stalled two years ago when the Competition Appeal Tribunal (“CAT”) refused to grant a collective proceedings order (“CPO”) to certify the action and allow it to continue to trial. Walter Merricks, the proposed class representative, appealed and on 16 April, in a dramatic change of events, the Court of Appeal overturned the CAT’s decision.
The Court of Appeal has now remitted the CPO application to the CAT for a re-hearing, where Mr Merricks will face significantly lower hurdles to certification in light of this judgment.
The collective damages action was brought by Mr Merricks in reliance on the European Commission’s decision of 19 December 2007. In that decision, the Commission found that multilateral interchange fees set by MasterCard for payments made using its credit or debit cards (“MIF”) resulted in a higher fees being charged between the cardholder’s bank and the merchant’s bank.
A number of claims have been brought against MasterCard however Mr Merrick’s claim is the only claim brought on behalf of end consumers, and the first collective action in respect of this infringement.
The power to bring collective proceedings was only introduced in the UK relatively recently with the coming into force of the Consumer Rights Act 2015 and this appeal is the first time that the Court of Appeal has considered a CPO application made under that regime.
The CAT, in its 21 July 2017 ruling, rejected to make the CPO principally on the basis of: (1) a perceived lack of data to undertake the proposed methodology for determining the level of passing-on of the overcharge to consumers; and (2) the absence of any plausible means of calculating the loss to individual claimants so as to devise an appropriate method of distributing any aggregate award of damages. See our blog post on that ruling here: https://www.bclplaw.com/en-US/thought-leadership/declined-competition-appeal-tribunal-strikes-out-collective-action-brought-against-mastercard.html.
Lowering the hurdles to certification
The first of two main grounds of appeal concerned whether the CAT had required too much at the CPO stage in the proceedings.
The Court of Appeal concluded that the CAT had required Mr Merricks to meet a standard that was too rigorous for the certification stage. In particular, it found that the CAT had strayed into holding what was effectively a mini trial, requiring Mr Merricks and his experts to specify details of what data would be available to them in order to quantify damages, despite the case being pre-disclosure. The CAT should have considered whether the proposed representative had a ‘real prospect of success’ but instead the Court of Appeal found that the CAT had “exposed the claim to a more vigorous process of examination”.
In coming to this conclusion, the Court did however note that certification is a “continuing process”, and a CPO can be varied or revoked at any time. The CAT would be able to bring the collective proceedings to an end if, for example, following pleadings, disclosure and expert evidence, there was not sufficient data to enable Mr Merricks’ proposed expert method to be performed.
Distribution of damages
The Court of Appeal also rejected the CAT’s finding that any methodology for distributing damages must calculate the level of individual loss suffered.
Mr Merricks accepted that his proposed method of distribution (based on distribution amongst the class on a per capita basis for each separate year of the infringement period) bore no relationship to individual loss. However, he placed reliance on section 47C(2) of the Competition Act 1998, which enables the CAT to make an aggregate award of damages "without undertaking an assessment of the amount of damages recoverable in respect of the claim of each represented person". The Court of Appeal held that whilst the CAT is required to take into account whether a claim is suitable for an aggregate award of damages when considering whether to make a CPO, that did not necessitate it determining whether the award can be distributed in a particular manner. Distribution is a matter to be considered at trial, and is not an issue for the certification stage.
This ruling significantly lowers the hurdles faced by representatives in pursing and progressing collective damages actions. However, the proposed claim still faces the challenge of an opposed hearing to achieve certification. Moreover, it is notable that part of the Court’s justification for overturning the CAT’s ruling was its consideration of certification being an ongoing process. This highlights the scope for challenging this proposed claim (and any claims where a CPO is made) once proceedings have progressed further towards trial, where potential deficiencies in the case, such as availability of data, are likely to be less hypothetical.
Given that this judgment has been handed down less than two months before a hearing in June 2019 at which the CAT is due to consider unrelated CPO applications issued in two separate actions brought in respect of the Trucks cartel, we will not have to wait long to see how this ruling, and the now lowered standards for certification, are going to be applied by the CAT in practice.