Mastercard Incorporated & Ors v Merricks [2020] UKSC 51

Walter Merricks sought to bring collective proceedings against Mastercard on behalf of 46.2 million UK consumers, alleging unlawful interchange fees were passed on through higher retail prices. The Supreme Court dismissed Mastercard's appeal, holding the Competition Appeal Tribunal had applied too strict a certification test.

Facts

Following a 2007 European Commission decision finding that Mastercard’s multilateral interchange fees (MIFs) on Intra-EEA card transactions infringed Article 101 TFEU during the period May 1992 to December 2007, Mr Walter Merricks CBE issued a collective proceedings claim form in September 2016 under section 47B of the Competition Act 1998 (as amended). He sought to represent a class of approximately 46.2 million UK adult consumers who had purchased goods or services from UK merchants accepting Mastercard during the 16-year infringement period. The claim alleged that the unlawful overcharge in the MIF was passed on in full by acquirer banks to merchants through the merchant service charge (MSC), and that merchants passed all or part of that overcharge to consumers in higher prices. The claim sought aggregate damages provisionally estimated at over £14 billion, proposed to be distributed on a per capita per annum basis.

The Competition Appeal Tribunal (CAT) refused to grant a Collective Proceedings Order (CPO), holding (i) the claims were not suitable for an aggregate award of damages because insufficient data was likely to be available to apply the proposed weighted-average pass-on methodology across 11 retail sectors over the infringement period, and (ii) the proposed distribution method did not accord with the common law compensatory principle. The Court of Appeal reversed, identifying five errors of law. Mastercard appealed to the Supreme Court.

Issues

The principal issue was the proper legal approach to certification of collective proceedings under section 47B of the Competition Act 1998 and rule 79 of the Competition Appeal Tribunal Rules 2015, including: (i) the meaning of “suitable to be brought in collective proceedings” and “suitable for an aggregate award of damages”; (ii) whether the CAT applied too high a merits or evidential threshold at the certification stage regarding the availability of data to support the experts’ methodology; and (iii) whether the common law compensatory principle required a distribution method aimed at approximating individual loss.

Arguments

Mastercard argued that the CAT’s decision disclosed no error of law, that its treatment of aggregate damages suitability reflected the Pro-Sys Consultants Ltd v Microsoft Corpn [2013] SCC 57 test, and that each of the two reasons given was independently sufficient to justify refusal of a CPO. Mastercard maintained the CAT was entitled to question the experts and to consider distribution at the certification stage.

Mr Merricks supported the Court of Appeal’s analysis, submitting that the forensic difficulties identified by the CAT would have been equally formidable for an individual claimant, and that the certification stage should not impose a merits threshold higher than a strike-out or summary judgment test.

Judgment

By a majority (Lord Briggs, with whom Lord Thomas and Lord Kerr agreed; Lord Sales and Lord Leggatt would have allowed the appeal but concurred in dismissal to avoid re-argument following Lord Kerr’s death), the Supreme Court dismissed Mastercard’s appeal.

Lord Briggs’ reasoning

Lord Briggs held the CAT’s decision was vitiated by several errors of law. First, the CAT wrongly concluded the merchant pass-on issue was not a common issue, which deprived the balancing exercise of a significant positive factor. Second, the CAT treated suitability for an aggregate award of damages as a hurdle rather than as one factor among many under rule 79(2). Third, the CAT failed to construe “suitable” in a relative sense, comparing collective proceedings with individual proceedings (which were not a practical alternative). Fourth, the CAT disregarded the fundamental principle that a court must do its best on the available evidence to quantify damages; forensic difficulties and incomplete data, which would not deny an individual claimant a trial if a triable issue existed, could not justify refusing certification. Lord Briggs emphasised the “broad axe” principle (Watson Laidlaw & Co Ltd v Pott Cassels & Williamson, Chaplin v Hicks [1911] 2 KB 786, Davies v Taylor [1974] AC 207) and European Commission guidance on quantifying harm. Fifth, the CAT was wrong to treat respect for the compensatory principle as an essential element of distribution, since section 47C(2) of the Act expressly removes the requirement for individual assessment of loss where aggregate damages are awarded.

Lord Briggs would not, however, criticise the CAT for questioning experts at the certification hearing, nor consider it inevitably premature to consider proposed distribution at that stage.

The minority view

Lord Sales and Lord Leggatt considered the CAT’s assessment that the claims were not suitable for an aggregate award of damages was lawful. They held that “suitable” means suitable to be grouped together and determined collectively under the statutory regime, and that the test is not simply relative to individual proceedings. They regarded the Microsoft test as appropriate and considered the CAT had applied a correctly low threshold in asking whether there was a realistic prospect that the experts’ methodology could be applied with available data across the proposed class. However, they concurred in dismissal in the unusual circumstances following Lord Kerr’s death.

Implications

The decision clarifies the operation of the collective proceedings certification regime introduced by the Consumer Rights Act 2015. The majority’s approach confirms that: (i) certification is not a merits test beyond strike-out or summary judgment levels; (ii) the listed factors in rule 79(2), including suitability for aggregate damages, are matters to be weighed in a multi-factorial balancing exercise and not separate hurdles; (iii) the suitability test is to be understood relatively, asking whether collective proceedings are suitable relative to individual proceedings; (iv) the “broad axe” principle of quantification applies fully to collective competition claims, and forensic difficulties with data should not defeat certification where claimants have a triable case of having suffered more than nominal loss; and (v) section 47C(2) radically modifies the compensatory principle, and distribution of aggregate damages need not approximate individual loss, requiring only that distribution be just, fair and reasonable.

The judgment is of considerable practical significance for consumers, funders, and defendants in UK competition litigation. By lowering the effective threshold for certification of opt-out follow-on claims, it facilitates access to justice for mass consumer claims that would otherwise be practically impossible to pursue individually. The case also reinforces the CAT’s specialist role and wide discretion, subject to appellate correction for errors of law. The strong minority judgment indicates, however, that the breadth of the certification gatekeeping function and the degree of scrutiny permissible over proposed methodologies remain matters on which views can legitimately differ, and future cases may test the outer limits of the majority’s approach.

Verdict: Appeal dismissed. The Competition Appeal Tribunal’s refusal to make a Collective Proceedings Order was vitiated by errors of law, and the application for a CPO was remitted to the CAT for reconsideration.

Source: Mastercard Incorporated & Ors v Merricks [2020] UKSC 51