UK class actions fail again

Mastercard

It has been a long-standing concern of insurers that US-style class actions might be adopted in the UK. These actions have the potential to generate massive damages awards, not least because they allow claims to be brought on behalf of individuals whose own losses may be too small to support the cost of legal proceedings on their own. 

That concern seemed to come a step closer to being realised with the coming into force on 1 October 2015 of the Consumer Rights Act 2015 and Section 47B of the Competition Act 1998. This legislation allowed, for the first time, opt-out class actions to be brought in the UK. The Act limited such actions (which it terms “collective proceedings”) to claims for breach of competition laws. Nonetheless, the potential for significant damages in claims involving everything from financial services to mobility scooters is clear.

Despite these legislative changes, however, it has proved difficult for claimants to have a proposed collective proceeding certified. Certification involves seeking an Order from the Competition Appeal Tribunal (CAT) which must decide whether the claims raise common issues and are suitable for a Collective Proceedings Order. This involves, among other things, an assessment of whether or not certification would facilitate the promotion of “fair and efficient resolution of common issues” and whether or not a court could award an aggregate amount in damages to the claimants.

The latest claim to fail these tests was Walter Hugh Merricks CBE v MasterCard Incorporated & Others in which certification was refused by the CAT on 21 July 2017.

In that case, the claimant’s allegation was that MasterCard had set an illegal multilateral interchange fee on credit card transactions. It was alleged that this caused loss to consumers who were required to pay inflated prices to businesses that accepted MasterCards. The reasons why the CAT rejected certification of this action are informative. In essence, the CAT found that there was insufficient data to demonstrate that it would be possible for a fair aggregate award of damages to be made in this case. The Court reached this conclusion not least because of the difficulties the claimant would face in showing how much of the interchange charge was passed on to consumers in the millions of individual transactions at issue.

In addition, the CAT found that even if an aggregate award could be calculated fairly, it was extremely difficult to see how that would be divided amongst the individual claimants. In particular, the Court commented:-

The governing principle of damages for breach of competition is restoration of the claimants to the position they would have been in but for the breach. The restoration will often be imprecise and may have to be based on broad estimates. But this application for over 46 million claims to be pursued by collective proceedings would not result in damages being paid to those claimants in accordance with that governing principle at all”.

The failure of the action against MasterCard means that to date there have been no successful applications for certification of collective proceedings. The CAT’s comments on the difficulties of assessing aggregate damages and of distributing those damages among individual claimants in an action for breach of competition law highlights some of the difficulties which claimants will face with such claims. It seems inevitable, however, that claimants will continue to refine and focus their claims in response to the CAT’s criticism with the result that a successful claim for certification will be made in due course.

Simon Cooper