Court of Appeal revives the largest ever collective action on behalf of consumers

Written on 13 May 2019

The Court of Appeal’s judgment in Merricks v Mastercard gives a boost to large collective actions by consumers for breaches of competition law. The judgment lowers the threshold for certification and removes the requirement that amounts paid to individual consumers be strictly compensatory. However, given the amounts at stake, the case is likely to be appealed to the Supreme Court.

What was the appeal about?

As we have previously reported, the Competition Appeal Tribunal (CAT) had declined to certify Mr Merricks’ action on behalf of all UK adults in which he claimed they had suffered loss because of an excessive fee charged between Mastercard and retailers. The CAT had found that the variance in potential loss between all the affected transactions was so great that it could not certify the class members as having “common issues”. It was also concerned that the lack of accuracy in calculating loss could lead to over- and under-compensation of individual claimants.

Mr Merricks appealed to the Court of Appeal and has won on both these points. The Court of Appeal found that the CAT had set too high a bar, and the Court was sympathetic to the challenges facing the claimants in quantifying their claim. The Court of Appeal found that the CAT had conducted a “mini-trial” of the merits of the claim, which it considered was not appropriate at certification stage.

The Court of Appeal’s findings

On the question of the feasibility of calculating loss, which requires an estimate of the pass-on of the Mastercard fee to customers, the Court found that the “expert methodology [had to be] capable of assessing the level on pass-on to the represented class and that there was, or was likely to be, data available to operate that methodology“. It was not necessary for the claimant to operate the methodology in order to gain certification, much less to produce all the relevant data. The test that Mr Merricks had to pass was to show he had a “real prospect of success“. The Court found the CAT had applied a higher test.

On the question of the variance in actual loss, the Court found that there was nothing in law to prevent over-compensation of some class members, if that was the result of the aggregate approach to calculating total damages. The Court’s view was that the introduction of a collective damages regime showed that there was no obligation to make an award “with reference to individual loss“. If there were such an obligation, this would “negate” the power to make an aggregate aware in “large-scale opt-out proceedings“.

The Court did not reject the need to attempt to make a distribution by reference to actual loss entirely. It merely found that distribution on that basis was unlikely to be practicable in this case.

What are the implications of this decision?

This was the second collective claim to be brought, with the first also being denied certification by the CAT. The Court’s comments may be intended to ensure that the collective actions regime is not strangled at birth. It went on to say that “the power to bring collective proceedings … was obviously intended to facilitate a means of redress” and noted that if such actions were not available in reality “litigation by way of individual claims [would be] a practical impossibility“.

The judgment is far from being a final victory for the claimant. Mastercard has already indicated it will seek permission to appeal to the Supreme Court. Furthermore, the Court did not actually grant a Collective Proceedings Order, but only remitted the matter back to the CAT to be re-heard. This claim is far from being resolved.

Other claims in the pipeline

Nevertheless, the judgment will have come as a relief to those behind the trucks follow-on claims, whose CPO application was recently heard, and to the team bringing the latest large-scale collective claim – on behalf of almost one million rail commuters in South East England.

In the latter, potentially landmark, claim, Justin Gutmann is bringing an opt-out claim which does not rely on an existing decision of the competition authority – a so-called “stand alone” claim. Mr Gutmann claims that three rail companies operating commuter routes in Southern England have abused their dominant position in failing to sell and/or advertise “boundary fares” to the holders of Transport for London Travelcards. Travellers have therefore “paid twice” for part of their additional rail journeys starting within their Travelcard zones. The application for a CPO will be heard in November 2019 – although it may be stayed until after the Merricks Supreme Court judgment. The CAT ruled on 8 May 2019 that the trucks cartel CPO application would be stayed until the outcome of that appeal (if granted) was known.