A new era: the UK certifies an opt-out competition class action for the first time

Introduction

In a significant case for the UK’s competition class action regime, the Competition Appeal Tribunal (CAT) has certified (subject to one condition) an opt-out collective claim brought by Mr Merricks, as class representative, against Mastercard.

We previously reported (here) on the Supreme Court’s December 2020 judgment, which ruled on the “Suitability Test” that the CAT applies where deciding whether or not a collective proceedings order (CPO) should be granted (i.e., the claim should be certified). As part of its judgment, the Supreme Court remitted this case back to the CAT. However, by the time of the new hearing before the CAT, Mastercard no longer objected to certification, meaning the CAT did not need to apply the Supreme Court’s guidance on assessing whether or not a claim is suitable for a CPO.

Whilst the unopposed certification is positive for Mr Merricks and the large class that he represents, it is disappointing that the CAT did not have an opportunity to consider the application of the Suitability Test, which would have provided valuable guidance for future potential collective claimants and defendants.

With certification conceded, the main substance of the judgment addressed two issues: whether or not deceased persons could be included in the class, and whether or not the claimants could seek compound interest.

The CAT’s decision to certify the claim was subject only to the condition that Mr Merricks’ litigation funder should provide a suitable undertaking to pay any costs order in Mastercard’s favour. As Mr Merricks’ previous litigation funder had been replaced, and a new litigation funding agreement put in place, the CAT was required to consider afresh whether Mr Merricks had access to sufficient funds for the proceedings, as part of its determination whether to authorise him as class representative. The funder has confirmed it is willing to provide the undertaking, meaning the claim now has the green light for certification.

Background

In 2014, the European Commission decided that Mastercard’s multilateral interchange fees (MIF) for cross-border transactions were set at an unlawfully high level over a 16-year period. The action now certified by the CAT alleges that these charges were passed on to consumers in the form of an increase in the prices paid for goods and services (the “overcharge”) and seeks compensation for losses suffered by them as a result. The proposed class is vast, comprising an estimated 46.2 million people as originally pleaded. Mr Merricks estimates aggregate damages in the region of £14 billion.

The CAT initially refused to certify the collective proceedings, on the basis that there were insufficient common issues between the claims of individual class members, and that the claim was not suitable for an award of aggregate damages due to issues with Mr Merricks’ proposed methodology. The Court of Appeal subsequently held that the standard the CAT had imposed on Mr Merricks at the certification stage was too high. The Supreme Court upheld the Court of Appeal’s decision and gave further guidance on the approach that should have been taken, which is summarised in our earlier Law Now.

The issues

Two substantive issues remained to be decided by the CAT in Mastercard v Merricks [2021] CAT 28:

1. The “Deceased Persons Issue”: One of the points taken by Mastercard in its initial response to the claim was that the proposed methodology for assessing aggregate damages did not include a way of excluding losses suffered by deceased persons. In the course of the hearing before the CAT, a dispute arose between the parties as to whether or not the proposed class definition was wide enough to include such claimants. In order to resolve this question, Mr Merricks applied for permission to amend the claim expressly to include deceased claimants. It was suggested that this would increase the number of claimants in the class by approximately 13.6 million.
2. The “Compound Interest Issue”: Mr Merricks argued that all members of the class would necessarily either have borrowed to pay for their purchases, or used an account with a credit balance to do so. They would therefore either have paid compound interest on their borrowing – including the amount attributable to the excess charges – or else have foregone the opportunity to receive compound interest on their credit balances. They should therefore be entitled to claim compound interest as a head of damages.

The Deceased Persons Issue

On remittal, Mr Merricks stated that he wished to include deceased persons within the class, bringing the total class members to 59.8 million. The CAT rejected Mr Merricks’ argument that claims by deceased persons could be included on the basis of the class definition in the existing claim form, observing that it was clear from the claim form and application that Mr Merricks intended to exclude from the class any person who was no longer alive.

Mr Merricks therefore applied for permission to amend the claim to include deceased persons, but this was refused, for two reasons:

• As a matter of English law, a claim cannot be brought in the name of a deceased person, but only in the name of their estate, which can act on their behalf via their personal representatives. Since collective proceedings are simply an aggregation of individual claims, the same principle applies. Because the proposed amendment (which was prepared at short notice during the hearing) was drawn by reference to the deceased themselves rather than their estates, it would be a nullity and could not be permitted.
• The limitation period for follow-on claims expired two years after the Commission decision, in 2016. Because collective proceedings are an aggregation of individual claims, they are subject to the same rules as individual claims regarding permission to add a new claimant after the expiry of the limitation period. These are set out in Rule 38 of the CAT Rules. Amongst the conditions is that the amendment is either to substitute a new claimant for an existing one, or to add a claimant whose involvement is necessary in order for the claim to be properly carried on. The CAT held that neither of these applied in the present case.

The Compound Interest Issue

The claim for compound interest, which was included in the original claim form as a separate head of loss, was estimated to add £2.2 billion to the total value of the claim. Mastercard submitted that this aspect of the claim should be excluded from the certification because it was not a common issue across the class and no plausible or credible method had been put forward for calculating the loss suffered by the claimants under this head.

The CAT agreed that this issue should be excluded from the claim as certified. The members of the tribunal had regard to the principles set out in the House of Lords case of Sempra Metals Ltd v Commissioners of Inland Revenue [2007] UKHL 34, where the court held that compound interest could be awarded as a distinct head of loss, but that it must be specifically claimed and justified. The CAT considered that there was no way of determining what consumers would have done with the relatively small amounts they would have saved in the absence of the excess charges (estimated to be under £10 per year in the typical case). While it was possible that they would have reduced their borrowings or increased their savings, it was also possible that they would have simply increased their purchases; it was not sufficient simply to show that an individual had borrowing and/or savings. Under the Sempra Metals principle, the loss of compound interest must be established and not simply presumed. Yet there was no credible or plausible way of establishing, even on an aggregate basis, what losses the class overall had incurred in respect of compound interest. Accordingly, that head of claim was not suitable for an aggregate award. Merricks would, however, be entitled to seek simple interest in the usual way under s.35A of the Senior Courts Act.

Having reached this conclusion, the CAT did not need to consider whether or not the issue of compound interest was common across the class. It commented in passing that the issue would not be common if only a small number of claimants had suffered losses under this head, but did not indicate what proportion of claimants would be considered sufficient to create a common issue.

Comment

The exclusion of compound interest from the claim will be welcomed by other parties who may be exposed to collective actions in respect of historic infringements over lengthy periods. Future claims will give careful thought to the type of economic evidence and methodology they can adduce to attempt to include compound interest within their CPO application.

The decision on deceased claimants is less likely to have an impact on future claims. It seems likely that, in an appropriate case, the class could be drafted in such a way as to include the estates of deceased claimants. Provided this is done before the expiry of the limitation period, there seems to be no reason why such a claim could not proceed.

Whilst the clarification on these points is welcome, the CAT’s judgment did not consider of the Suitability Test which is a central element of the certification process. It would have been helpful to see the CAT engage in a full analysis of the Merricks claim, and in applying the arguably more permissive approach and lower threshold for certification that was posited by the Supreme Court. That said, the CAT is presently working its way through a backlog of CPO applications that had been held up pending the Supreme Court judgment, and so we will not have to wait too long for guidance from the CAT on how it will apply this test.