The UK's Largest Lawsuit

In August this year, the Competition Appeal Tribunal (CAT) authorised the UK’s biggest class action trial. The case is brought by ex-financial ombudsman Walter Merricks, and had previously been thrown out by the Supreme Court.

Background to the Dispute

In 2007, the European Commission ruled that Mastercard’s ‘interchange fees’ (transaction fees that the merchant’s bank account must pay whenever a customer uses a credit or debit card to make a purchase from their store) were in breach of competition law.

Merricks successfully appealed the Supreme Court decision.

The Competition Appeals Tribunal has now approved a £10 billion lawsuit on behalf of 46 million consumers as part of a CPO (collective proceedings order). This means that all individuals who bought goods and services from a UK business that accepted a Mastercard debit or credit card between 1992 and 2008 will be included, unless they have specifically opted-out of the lawsuit.

Already, Merricks has criticised the £10 billion potential recoveries, arguing that the claim would have been higher had the tribunal not excluded claims for compound interest and deceased claimants.

Merricks is seeking compensation for consumers and small businesses for Mastercard’s anti-competitive behaviour.

Why Is This Important?

This case is significant because it’s using the ‘opt-out’ regime, which was introduced in 2015, in order to facilitate broader consumer claims. It is likely that if Merricks is successful, the UK could see an increase in CPOs where the claimants have the option to opt-out rather than opt-in. This approach would see the UK more closely aligned with US-style class-action lawsuits.

Financial Times analysts have pointed out that collective legal actions will likely see an increase due to Covid-19. This has been tempered by the Financial Conduct Authority’s decision in January this year in favour of insurers over the pandemic’s ‘business interruption’ claims. Had the FCA ruled in favour of consumers and business, there would have been an avalanche of litigation from a variety of parties such as restaurants, pubs, events venues, hair salons, dentists etc.

Talking points:

• What are the risks for SMEs in litigation cases?
• Do you think using a CPO has improved litigation’s procedural efficiency?
• Are there any downsides?