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Why Mastercard's coming fight against mass claim is a must-see
06 Aug 2019 12:00 am by Simon Zekaria
Just about every adult in the UK has a reason to tune in when Mastercard’s bid to halt a planned mass lawsuit over its card fees reaches the UK's highest court.
That’s because if Supreme Court judges approve the UK's largest-ever legal claim as suitable to go to trial, 46 million consumers could ultimately receive as much as 300 pounds ($370) each as compensation for inflated debit and credit card fees.
In reality, the vast majority of consumers won't be aware of the Supreme Court's decision late last month to allow Mastercard's challenge, or the legal saga leading up to it.
After all, Walter Merricks — a consumer-rights campaigner who filed the claim against Mastercard on their behalf — didn't individually notify the people he represents that they were automatically included in a suit seeking to win damages of 14 billion pounds ($17 billion).
That would all change, of course, if a payout is awarded. But such an event is still a way off and entirely uncertain.
Merricks' claim stems from a European Commission decision from 2007 that said Mastercard’s interchange fees — bank-to-bank charges when a purchase is made — were illegally high for more than 16 years.
Even for a company worth around $260 billion, a multibillion-dollar damages payout is a material loss. More significantly, losing the case could threaten Mastercard's entire payments business model — not to mention that of its big rival, Visa.
But it won't be just Mastercard and Visa executives watching.
Truck makers, train operators and, most recently, banks will also be scrutinizing the outcome of his challenge. That’s because they are also the target of mass lawsuits in the UK and their fate is very much tied to whether Merricks' tilt succeeds or falls.
The Supreme Court judges will be tasked with unknotting a series of conflicting legal rulings by lower courts over whether Merricks' claim should be certified as acceptable to be heard at trial.
In 2017, the Competition Appeal Tribunal rejected his suit. He then persuaded the Court of Appeal to overturn that decision last April. Mastercard had the most recent fillip last month, winning the right to challenge that appeal ruling. The Supreme Court will see the core arguments in those rulings return to center stage.
The CAT turned Merricks down because it wasn’t satisfied that he would be able to prove that fees charged to businesses by Mastercard were then passed on to consumers in higher prices, or to precisely quantify and distribute the monetary loss for every consumer in the action.
Specifically, it said Merricks didn’t prove passing on because a key criterion for collective actions — "commonality" between the transactions — was missing. It said, too, that he didn’t establish a method either to calculate classwide losses or allocate damages on an individual basis.
The CAT exposed a critical tension at the heart of collective suits: whether they focus on promoting damages for individual loss, or an aggregate award to compensate a class of victims.
Earlier this year, however, the Court of Appeal ruled that the CAT had erred in its approach to Mastercard passing on costs and on the level of detail needed for estimated losses, and it argued that compensation to class members doesn't have to individuated.
It said the tribunal should only need to be satisfied that the claimant’s data method is “capable of, or offers a realistic prospect of, establishing loss to the class.” It was wrong for the CAT to require Merricks "to demonstrate more than that he has a real prospect of success," its judgment said. The tribunal had “demanded too much of the proposed representative at the certification stage.”
Now the Supreme Court has positioned itself to clarify the approach after agreeing on July 25 to hear Mastercard's challenge to the Court of Appeal ruling.
It won’t be easy. The CAT admitted that the issues enter novel judicial territory, and the legal analysis has become polarized. The court has three clear choices: back the Court of Appeal, support the CAT's original stance, or light up a new route altogether.
UK class-action regime
With a raft of claims backed up awaiting the court's determination in the Merricks case, the fate of future collective competition actions in the UK hinges on the outcome.
Merricks himself admits this. While Mastercard maintains the claim is unsuitable to be brought and should be thrown out, Merricks says it is key to the progress of the UK’s emerging collective-action regime, brought in four years ago following an overhaul of laws to allow large classes of consumers to gain redress from breaches of competition law.
Those legal changes fit in sweetly with a rising regulatory focus in the UK on protecting consumers from corporate abuses.
Yet the regime remains stuck at first base. There have been two attempts so far to obtain certification for trial, known as a “collective proceedings order,” and both were rejected by the CAT. One is the Merricks case and the other was brought by pensioner Dorothy Gibson against US mobility-scooter maker Pride.
But pressure is building. Train operators Stagecoach South Western Trains, First MTR South Western Trains and London & South Eastern Railway have been targeted by a collective action, as have truck makers including DAF Trucks, MAN and Iveco, and more recently, a host of banks including Barclays, UBS and JP Morgan.
The Mastercard case has already had a material effect on the truck claims, as the CAT has postponed hearings to wait for the Supreme Court’s view on the Merricks case.
With the Supreme Court unlikely to hear Mastercard’s appeal until late next year, and a ruling not expected for months after that, the series of waiting claimants and defendants can expect significant expense in time, money and uncertainty.
At least the months ahead offer time for Merricks' 46 million consumers to get up to speed on his efforts.