Landmark Consumer Challenge Continues: Mastercard swiped by £14bn mass consumer claim

December 28, 2020

3 min read

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What's going on here?

Between 1992-2008, the fees Mastercard charged businesses for accepting payments from consumers in the UK (interchange fees) were too high. Consequently, UK consumers paid higher prices on purchases from businesses that accepted Mastercard. This breach of competition law could entitle 46.2m eligible Britons up to £300 each, making a potential mass consumer claim against the card provider worth just under £14bn.

What does this mean?

Walter Merricks, a former financial ombudsman is seeking legal redress in the UK courts to hold Mastercard accountable for its breach. The claim is on behalf of all over 16s who were resident in the UK for at least three months between 1992 and 2007, and who bought an item or service from a UK business which accepted Mastercard – the 46.2m consumers.

In 2017, the proposed class action was initially thrown out by the specialist Competition Appeal Tribunal (CAT), who said it was ‘not suitable to be brought in collective proceedings.’  After an appeal by Merricks, in 2019, the Court of Appeal surprised many in overturning the CAT’s decision saying the CAT had applied the wrong legal test, so must reconsider Merricks’ class action. Mastercard appealed.

Now, in December 2020, the Supreme Court (Britain’s highest court) has upheld in a majority that the CAT made five errors of law and needs to reconsider Merrick’s case under more lenient legal standards.

What's the big picture effect?

If and how Mastercard settles this claim remains to be seen, and even then it may fall far short of the £14bn speculated – a figure the Supreme Court held in its own judgment to be a ‘considerable over-estimate’ of what could actually be paid out. Nonetheless, it remains a landmark ruling given that the Supreme Court’s decision has in practice approved the first claim of its kind under the 2015 Consumer Rights Act (CRA). It sets the benchmark that consumer claims must meet under this Act in order to proceed to a trial where damages can be awarded. In doing so, it will now become easier for people to claim for other breaches of competition law made by previously untouchable companies. This is because the ruling provides transparency over the required standard of claims, thereby increasing access to justice for consumers. Law firms can thus expect a whole wave of similar large-scale, opt-out collective actions to be brought under the CRA in the future.

CMS lawyer Kenny Henderson suggested “the bigger concern for business more generally is that the Supreme Court ruling will encourage claimant law firms to file more class actions against other large companies” and that the decision could lead to “a shift towards the class action culture that we associate with the US.” Unsurprisingly, Mastercard agreed, stating that “no UK consumers have asked for this claim. It is being driven by ‘hit and hope’ U.S lawyers.”

However, the notion that consumers did not ask for this claim is somewhat puzzling. Take it like this. If you, as an individual consumer, were astute enough to realise that Mastercard overcharging businesses were causing you to pay higher purchase prices, how would you go about recompensating your loss? Even if you knew how, could you? Against the financings and resources available to a global corporation?

As Merricks spoke after the ruling: “enforcement of fair competition laws is vital for this country’s market economy and companies who break these laws can now expect not only to be fined by the regulator, but to face much bigger bills in redress claims from those they damaged.” What the ruling against Mastercard represents is a shift in the balance of power from companies to consumers. So, if it is perceived that mass consumer claims like Mastercard really are “hit and hope”, expect plenty more home runs in the future.

Report written by Seb Stacey

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