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Court rejects landmark application for £14bn class action against MasterCard in Freshfields win

The Competition Appeal Tribunal (CAT) has today (21 July) ruled against certifying one of the first US-style £14bn opt-out consumer damages antitrust class actions, against payment giant MasterCard, in what would have been the UK’s largest claim.

CAT president Mr Justice Roth ruled against allowing the collective proceedings application on grounds that potentially disparate groups of claimants could not form a single class action for the purposes of this claim, regardless of the means of payments used or the retailer from whom the purchase was made.

The judgment is a win for Freshfields Bruckhaus Deringer, which represented MasterCard.

The applicant, former UK chief financial services ombudsman Walter Merricks, sought damages for 46m consumers in the UK relating to MasterCard’s multilateral interchange fees (MIFs) charged to retailers. Quinn Emanuel Urquhart & Sullivan represented Merricks’ claim, funded by Burford Capital for up to £43m, with £10m to cover MasterCard’s costs if the claim failed.

In what would have been the first collective damages action of its kind, Roth ruled that even if loss had been suffered and could be estimated across the whole class, there was no way of ensuring that a class member would receive distribution of an amount compensating any actual loss suffered.

The CAT concluded, however, that if it had allowed the collective proceedings to proceed, it would have authorised Merricks to act as class representative.

The application was one of the first to be filed under the Consumer Rights Act 2015, designed to allow US style ‘opt-out’ group damages claims to be brought in the UK CAT.

The damages claim bid related to consumers who bought purchases over an 18-year class period from 1992 to 2008 and to whom retailers allegedly passed on MasterCard’s MIF overcharges.

The claim, if certified, would have been the first major case under the new framework for class action law suits on behalf of a large number of claimants.

In a statement, Merricks said he was now considering with his advisors and funders if he could appeal. He said he was ‘surprised and disappointed’ that the CAT rejected his application to bring collective proceedings against MasterCard.

‘The new collective action regime was introduced by the Consumer Rights Act to overcome the difficulty for consumers seeking to recover losses from competition law infringements. I am concerned that this new regime, designed to benefit consumers, may never get off the ground’, he said.

‘It is disappointing that the Tribunal determined that even if I could identify accurately the loss suffered by all 46 million consumers, the fact that I could not precisely calculate the individualised loss for each of those 46 million consumers, means consumers should get nothing at all,’ said Merricks.

The case followed an European Commission (EC) probe into MasterCard. Its 2007 decision found MasterCard overcharged MIFs and lacked ‘procompetitive benefits or proven efficiencies’.

Marc Israel, an antitrust partner at White & Case, said: ‘This is a real setback for the collective proceedings regime. This is the second case that has failed, following Dorothy Gibson in the mobility scooters cartel case earlier this year.’

Israel added that the ruling ‘may well deter other potential class representatives from seeking to act on behalf of potential claimants and incurring the time and expense in seeking to become a representative in such cases.’

Covington & Burling partner Elaine Whiteford told Legal Business that ‘from a perspective of funding of claims, the judgment is encouraging as it clarifies a funders’ uplift can be paid from undistributed damages’, one of MasterCard’s arguments, which would have made funding much more difficult had it succeeded.

‘However, given this is a new regime, I am slightly surprised the judge didn’t invite the applicants to provide further detail in the first instance, as it did in the previous application under the new regime.’

Freshfields’ Jon Lawrence told Legal Business that the tribunal accepted ‘that the regime is designed to compensate individuals. In this case there was no way to estimate the loss suffered by any one individual.’

A Freshfields spokesperson described the judgment as ‘an important development for the UK’s collective actions regime,’ adding that ‘additional clarity has been given as the criteria to be satisfied and the evidence required to grant certification of collective actions in the UK. The judgment also addresses the terms of funding arrangements that can be used by those bringing collective actions’.

Quinn partners Boris Bronfentrinker and Kate Vernon, instructed Paul Harris QC of Monckton Chambers and Marie Demetriou QC of Brick Court Chambers.

Freshfields’  Jon Lawrence, Mark Sansom Jonathan Isted, Mark Sansom and Nick Frey, instructed Brick Court’s Mark Hoskins QC, Ben Williams QC, and Tony Singla.

Recent cases rooted in the 2007 EC decision against MasterCard include Sainsbury’s claim against MasterCard in 2016, an antitrust damages action which resulted in a £69m award and substantial interest after the CAT ruled its UK and Irish interchange fees were unlawful.

This year, Humphries Kerstetter also launched a series of new £300m competition damages claims relating to alleged losses against MasterCard and Visa, on behalf of a group of 27 UK high street companies, related to their MIFs, which form part of ‘merchant service charges’ retailers pay banks on card transactions made in store or online.

Earlier this year, however, in a separate claim by a group of UK high street retailers against the company, the High Court ruled that MasterCard’s cross-border interchange fees were lawful, necessary to its business operation and ‘below any objectionable level’, dismissing the £450m damages case. Asda, Morrisons, Arcadia, and Homebase/Argos are currently seeking permission to appeal the judgment.