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There has been great anticipation of the Supreme Court’s decision in Mastercard Inc et al v Merricks. The parties have been waiting, claimants in other cases (that have been stayed pending this decision) have been waiting. Lots of lawyers have been waiting. It is fair to say that even litigation funders have been waiting. Ironically, the one set of people who may not have been waiting is the actual class of claimants represented by Mr Merricks, and that is a little surprising when you appreciate that the class includes more than 46 million people. Now, however, that has all changed as the media have taken it upon themselves to suggest that we are all in line for a £300 handout, thanks to Mastercard and Mr Merricks’ persistence.

A whistle-stop tour of collective actions in England is necessary before getting into the detail of the Mastercard case. Courts had struggled for years to come up with a fair and balanced system for dealing with large scale claims that are often of low individual value but that are consequent upon admitted wrongdoing. In 2015, English law was amended to as to allow, for the first time, opt out collective proceedings to address certain breaches of competition law. In limited circumstances, the Competition Appeal Tribunal (CAT) could hear such group claims provided they passed an initial filter and were considered to be eligible for a Collective Proceedings Order (CPO) - in order to pass muster, they needed to cover common issues and be eligible (which turned on a suitability criterion). Such opt out proceedings were radical under English law for two reasons - (a) they could be brought on behalf of someone who may not even know that he/she had a claim, and (b) they benefited from a very significant relaxation of the ordinary rules as to proof of damage - the CAT could disapply the usual rule that individual claimants had to prove their loss and could, instead, render an award of aggregate damages for the group. The second point is of course a logical corollary to the first - if a claimant was not aware of the proceedings, it very possibly was not going to be able to prove its loss. The procedural filter of a CPO was adjudged to be necessary partly as a protection for a defendant who could theoretically suffer significant injustice in light of the two reasons, it being noted by both the Court of Appeal and the Supreme Court, rightly and perceptibly, that such claims could well be funded by commercial entities that were motivated by profit. However, provided a suitable representative could advance the claims and demonstrate that they were suitable to be heard as a collective action, the claims could proceed to trial. Step forward Mr Merricks, who is the representative of the class of claimants (all 46.2 million of them) who have purchased goods or services over a 16-year period from a business that took Mastercard as a payment option. Over the period, the evidence was that there were ultimately 800,000 such businesses. On any view, as the Supreme Court observed, the class action was “gargantuan”. The claim seeks damages in the sum of £14 billion.

A quick canter through the facts will suffice to demonstrate that Mr Merricks has a valid, and promising, cause of action. He is engaged on what has become known as a “follow on” claim - in other words, his case follows on from a regulatory finding already proving liability. He is solely concerned with proving that the class suffered a loss as a consequence of a breach of duty. In this case, in 2007, the European Commission found that Mastercard had breached its duty over a 16 year period in the setting of certain card fees that it levied within the EU on the various banks that participated in the credit transaction (although importantly the decision was not directed against the U.K. fees). These fees were passed on to the businesses who accepted the cards and, so the case theory goes, were passed on to the actual consumers too because the prices of the goods or services were inflated to take account of the card fees that were payable.  It has been a working assumption that Mastercard’s breaches percolated through to the setting of the U.K. fees with the same consequential passing on issues to the consumer. Mastercard denies everything but, in essence, Mr Merricks is seeking the overcharge levied to the 46.2 million consumers by the 800,000 businesses. 

You are not alone if you think Mr Merricks may have some difficulty showing individual losses for each and every transaction over a 16-year period. However, remember a key advantage to the collective process is that Mr Merricks does not need to show individual losses. He could instead seek an aggregate award provided he could justify certification of the class via the CPO. The CAT, as a specialised body with unrivalled experience in competition cases, determined that Mr Merricks could not justify certification - the claims did not concern common issues and the case was not suitable for an award of aggregate damages and so was not eligible. As an additional impediment, the CAT could not condone a distribution of damages that was inherently unreliable - and the CAT could not rely on the expert methodology and the available data to determine the appropriate level of damages, that it felt ought to be compensatory in nature. 

The Court of Appeal reversed the CAT which was to be expected given that the CAT seemed to fall into error on two key points - first, it was hard to disagree with the view that the group claims all did cover common issues (the setting of the fees) and, secondly, since the whole rationale of the collective process was to do away with the need to prove individual loss it seemed odd that the case fell at the damages hurdle. In short, the Court of Appeal’s reasoning was that the CAT applied too high a test - it was relevant here that the statutory purpose of the legislation was clearly to make it easier to pursue group claims, not to make them more difficult.

Mastercard’s appeal to the Supreme Court therefore provided the opportunity for clear guidance to be given as to the appropriate procedure to be followed in collective proceedings. It is important to appreciate this narrow nature of the decision. Unfortunately, the Supreme Court’s judgments do not provide the decisive guidance that was badly required. Although Mastercard’s appeal was dismissed, and the matter remitted to the CAT in relation to the matter of the CPO, in fact only two speeches were made, both supported by another Justice - and each one made a persuasive case for each side of the argument. The reason that the appeal was dismissed was because the decision would have been 3:2 in favour of dismissal would it not have been for Lord Kerr’s untimely death.

Lord Briggs, dismissing the appeal, grounded his views on the fact that the statutory purpose was to make such claims easier to bring and claimants should not be prejudiced by choosing to bring their claims collectively. If they could have been brought individually, then the law cannot bar them because they are instead brought collectively. Given that the Courts are constantly grappling with issues of damages, to deny justice at an early stage because of an uncertainty as to the approach to damages was not reasonable. A defendant cannot get off the hook because of the difficulty of showing damage. The CAT had wrongfully elevated the concept of suitability of an aggregate award to be some type of hurdle and, in any event, had made two glaring errors as to a lack of commonality and the misconceived approach to the compensatory nature of damages. Lord Briggs felt the outcome in the CAT would have been different had the CAT proceeded on the basis that all issues argued in the case were indeed common ones. Lords Thomas and Kerr agreed with his reasons.

Lords Sales and Leggatt gave a joint speech. They approached matters from the other direction - Parliament had put in place a filter system for a reason, the CAT was the acknowledged expert in the field and it was entitled to take a rigorous approach to the question of damages, particularly because the methodology of the experts suggested that it was going to be very difficult, if not impossible, to come up with a fair approach. The Court needed to be mindful of the potential risks associated with these claims, particularly if brought by profit orientated third parties. Given that Mr Merricks had only claimed for an aggregate award of damages, the CAT was entitled to deny a CPO if it found that the case was not suitable for an aggregate award. Indeed, it had no choice. The point about a collective claim not putting up additional barriers that an individual claim would not have had was not sound - the CAT was not looking at the position of an individual claim - it needed to concentrate on whether the claims were suitable to be heard on a collective basis. For the same reason, the CAT was entitled to view specific criteria (like the suitability of an aggregate award) as being fundamental - that isn’t erecting a barrier, it is focussing on the key issue for the purpose of the collective proceeding.

The reason why the Supreme Court’s analysis is challenging is that, whilst Mastercard’s appeal was dismissed, the reasoning of the two dissenting Justices is persuasive and will be latched onto by defendants, particularly in the context of a collective proceeding as large and complex as the Mastercard case. There is a natural tendency to assume that the bigger the case, the greater the need to demonstrate that a class member has actually suffered a loss. The danger of moving away from proof of individual losses is that a claimant may not have to prove causation either. Whilst the collective regime provides for an aggregate award of damage, it seems a step too far to signal an intent to allow claimants to participate in actions when they do not need to prove other ingredients that would normally be necessary in actions for damages, particularly in circumstance where some claimants don’t even appreciate that they have claims. Although the CAT will have had its wings clipped, the case is still going to have to grapple with some serious legal issues. The £300 won’t be coming in time for Christmas and may be still a few years away.

There is no doubt that the decision of the Supreme Court will be perceived by some as giving the green light to a further raft of actions, but perhaps the safer course is to view the decision as being limited to ruling that claims should not be stopped in their tracks because the damages are not yet quantified, or indeed immediately quantifiable. However, that does not mean that an aggregate award of damages will be automatically ordered unless the CAT considers it just to do so - when it comes to assessing damages, the same rigour as goes into any competition claim can be expected to be applied in collective claims. Any dumbing down of obligations goes to the procedural steps, not the proportionate and legitimate approach to evaluating loss on a group wide basis. The floodgates may have been adjusted, but they are still in place and will not be removed any time soon. Nevertheless, companies will need to be cognizant of the possibility of collective actions being filed because it is now more likely that these actions will pass the certification stage and so present a real and present danger. Indeed, Justice Briggs said that the availability of a collective action mechanism “creates a powerful disincentive against anti-competitive conduct in the future”. Given that it is unlikely that the English consumer will benefit from the Collective Redress Directive recently enacted by the European Parliament, the Mastercard decision is a welcome boost to the victims of such behaviour.