The Supreme Court dismissed Mastercard’s appeal and held that the Competition Appeal Tribunal had applied the wrong legal tests when it refused to certify a vast opt-out consumer claim. Difficulties in quantifying the alleged loss, and a proposal to share any award equally, were not in law reasons to shut the claim out at the certification stage. The application was sent back to the Tribunal; the Court did not decide whether Mastercard was liable or what, if anything, should be paid.
The claim
Mastercard operated a four-party card scheme. On a card payment, the cardholder’s bank paid the retailer’s bank, which paid the retailer. Scheme rules provided for an interchange fee, deducted before the retailer was paid. The retailer’s bank added its own fee. Those deductions together were the merchant service charge. It was common ground that the interchange fee was passed on in full to retailers.
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If no other fee was agreed, a default multilateral interchange fee applied. In December 2007 the European Commission decided that Mastercard’s default Intra-EEA fee, set since May 1992, restricted competition. Mastercard accepted that it was bound by that finding for the period from May 1992 until December 2007. This is a follow-on claim: it relies on that binding decision rather than asking the Tribunal to decide the breach itself.
In September 2016 Walter Merricks sought to represent an estimated 46.2 million UK-resident adults who had bought goods or services from merchants accepting Mastercard during that period. Class membership did not require the person to have held or used a Mastercard. The claim alleged that any unlawful overcharge was passed on in higher prices to all customers, not only card users. Business customers were excluded. The proceedings were opt-out, so a UK-domiciled person within the class would be included unless they opted out.
The claim said that, but for the infringement, both cross-border and domestic interchange fees would have been lower. Mastercard denied that the infringing cross-border fee caused any unlawful increase in domestic UK fees, which covered most relevant transactions. It did not accept that merchants passed any overcharge on to customers. In separate claims by merchants, Mastercard had argued that merchants did pass overcharges on and therefore suffered no loss, or less loss.
Mr Merricks sought aggregate damages for the proposed class, with a broadly equal share for each eligible year. The total and individual figures were estimates. No compensation had been awarded.
What certification required
The Competition Act 1998 allows a representative, who need not belong to the class, to bring claims raising the same, similar or related issues before the Competition Appeal Tribunal. Aggregate damages compensate the class as a whole without a separate calculation for each member. The Tribunal decides how an aggregate award is distributed. Any unclaimed residue goes to a charity specified by the Lord Chancellor or towards the representative’s costs and expenses.
Collective proceedings cannot continue beyond issue and service without a collective proceedings order. The Tribunal must consider it just and reasonable to authorise the representative, and the claims must be eligible: they must raise common issues and be suitable for collective proceedings. The Tribunal may later revoke the order, strike out a claim or give summary judgment. An appeal against certification lies only on a point of law.
The rules list matters bearing on suitability, including the fair and efficient resolution of common issues, costs and benefits, the size and nature of the class, and suitability for aggregate damages. Those matters are factors in one balancing exercise, not separate conditions. The strength of the claims is expressly relevant to choosing opt-in or opt-out proceedings. No strike-out or summary-judgment application was made here.
The Tribunal’s refusal
The Tribunal held that Mr Merricks could properly be authorised. Mastercard did not pursue that objection. It refused certification because it considered the claims unsuitable for collective proceedings.
His experts proposed to divide retailing into about 11 sectors, estimate pass-on in each and calculate a weighted average. The Tribunal was not persuaded that sufficient data would be available for the whole period to make that method reliable enough. It did not find that the class could prove no loss. It treated unsuitability for aggregate damages as sufficient by itself to refuse an order.
It also held that, if aggregate damages were not based on individual loss, distribution had to provide a reasonable and practicable route back to individual compensation. Equal annual shares did not. That was a second independent reason for refusal. The Tribunal regarded merchant pass-on as not a common issue, although the overcharge issue was common.
Why the refusal was wrong in law
The Court of Appeal held that merchant pass-on was a common issue. That conclusion was not challenged. Lord Briggs, with whom Lord Thomas agreed and with whom Lord Kerr had agreed, held that the refusal contained further legal errors.
Suitability is relative to the alternative of individual proceedings. Once a claimant shows a triable issue of more than nominal loss, incomplete or difficult evidence does not justify refusing a trial: the court or tribunal must quantify as best it can. The same pass-on difficulty would confront an individual shopper, for whom a claim would be impracticable. Refusing certification would be likely to leave the alleged consumer losses without any practical remedy. Suitability for aggregate damages was only one factor, not a hurdle. Because both principal issues were common issues, that was a powerful point in favour of certification.
Section 47C expressly permits aggregate damages without assessing each person’s loss. Distribution need only be fair and reasonable. Equal sharing may be just where individual assessment is impractical and the sums are modest. The proposed distribution was not a reason to refuse certification; an unsatisfactory method could normally be addressed later. Lord Briggs did not regard the Tribunal’s questioning of the experts as an improper mini-trial. He left open whether, if uncertainty remains at the quantification stage, the benefit of the doubt belongs to the claimant or the defendant.
Canadian certification cases, particularly Pro-Sys Consultants Ltd v Microsoft Corpn, were persuasive because of their similar purpose, but the decision was founded on the United Kingdom legislation and ordinary civil procedure.
The minority view
Lord Sales and Lord Leggatt agreed that distribution need not track individual loss. They disagreed about quantification. They considered that the Tribunal had lawfully required a realistic prospect of applying the proposed method across substantially the whole class, and that its conclusion entitled it to refuse certification because aggregate damages were the only relief sought. They would have allowed the appeal.
They nevertheless agreed that it should be dismissed. Lord Kerr had agreed with Lord Briggs and died on 1 December 2020, before judgment was handed down. The panel was reconstituted under section 43(4) of the Constitutional Reform Act 2005. An even division caused only by his death would have required the appeal to be re-argued, which they regarded as unjust and wasteful.
Verdict: The Court dismissed Mastercard’s appeal and returned the application to the Competition Appeal Tribunal. The Tribunal had to reconsider certification under the correct legal tests. The Supreme Court neither certified the class itself nor awarded damages.
Source: Mastercard Incorporated and others v Walter Hugh Merricks CBE [2020] UKSC 51
