Breakthrough for UK opt-out class actions as Court of Appeal gives green light to the £14bn claim against Mastercard

The Court of Appeal has confirmed that the largest claim in the history of UK civil litigation, and the first claim under the UK's flagship "opt-out" regime, can proceed.

How did we end up here?

The action is based on the EU Commission's finding that MasterCard's EEA multilateral interchange fees (MIFs) breached Article 101(1) TFEU (see here for further details). That finding was upheld by the European Court of Justice (on appeal by MasterCard) on 11 September 2014 (see our further coverage here).

On 21 September 2016, Mr Merricks (the applicant) applied for a “collective proceedings order” (CPO) pursuant to the new opt-out damages regime introduced by the Consumer Rights Act 2015, permitting him to act as the class representative bringing opt-out collective proceedings. Obtaining a CPO certification by the class representative (here, Mr Merricks) is the first stage in an opt-out class action. Opt-out proceedings are unique in that everyone within the defined class is automatically included in the claim (if they are domiciled in the UK) unless they positively opt-out. In the Merricks claim, the proposed class would comprise of individuals who between 22 May 1992 and 21 June 2008 purchased goods and/or services from businesses selling in the UK that accepted MasterCard cards (see our contemporaneous coverage here).

On 21 July 2017, the Competition Appeal Tribunal (CAT), being the specialist English competition court in which opt-out class actions are heard, took the view that that the claims were not eligible for inclusion in collective proceedings and refused the CPO application. Their reasoning focused on the applicant’s lack of a sustainable methodology which could be applied in practice to calculate a sum which reflected an aggregate of individual claims for damages. In addition, the applicant had not put forward a reasonable and practicable means for estimating the individual loss which could be used as the basis for distribution (see our contemporaneous coverage here).

The CAT refused permission for Mr Merricks to appeal, finding in particular that there was no statutory right under the Consumer Rights Act 2015 to appeal to the Court of Appeal, and on 24 November 2017, the CAT handed down a ruling on costs.

However, the Court of Appeal disagreed with the CAT and, on 13 November 2018, held that there was a right of appeal from the ruling of the CAT refusing the application for a CPO (see our contemporaneous coverage here).

What did the Court of Appeal have to say about certification?

On 16 April 2019, in a unanimous decision of the Court of Appeal, Patten, Coulson, and Hamblen LJJ allowed the appeal by Merricks, quashing the previous CAT decision to refuse the CPO application, and remitted the case back to the CAT, where certification is now almost certain to follow. The Court of Appeal refused to grant leave to appeal to the Supreme Court, although Mastercard may still attempt to apply directly to the Supreme Court for permission to appeal.

The Court of Appeal was of the view that the CAT had sought to conduct a mini-trial at the certification hearing and had required the claimant’s expert to provide a level of detail in terms of the available evidence that was premature at the certification stage. All that was required was that the claimant could demonstrate a real prospect of success (i.e. a reasonably arguable case - which is the same standard as would have applied had Mastercard sought to strike out the claim).

The Court of Appeal also concluded that the CAT incorrectly analysed how distribution of any damage award should be made. It held that it was premature (and potentially wrong) for the CAT to refuse the application for a CPO on the basis that a proposed method of distribution is unreasonable or impractical. Distribution of loss amongst those represented by the applicant is a factor which should only follow a successful claim and an aggregate award, and it was not clear that any model of distribution must track the aggregate award back to a given individual loss.

What the decision means for you?

This decision marks a major development in the UK’s opt-out damages regime and means we will now see at least one case progressing beyond certification in 2019 (as we predicted at the start of the year - see our commentary here). With a more relaxed standard being imposed by the Court of Appeal, other certifications may well follow - the CAT is shortly to hear the certification application in the trucks cartel and a further claim has been filed in relation to damages for train fare pricing relating to boundary fare zones.

This decision will no doubt also encourage claimant law firms and litigation funders, who we know are actively exploring other opt-out competition litigation opportunities, to accelerate the pursuit of such claims. In addition, as the Merricks claim moves ahead further, it is likely to generate a number of further legal issues before a final trial relevant to opt-out collective actions.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.