A record-breaking collective claim against MasterCard was thrown out by the Competition Appeal Tribunal today in a major blow to the growth of funded class actions in the UK. The case, brought by former financial services ombudsman Walter Merricks on behalf of 46 million consumers who were alleged to be victims of excess 'interchange fees' charged by card companies, claimed £14bn in damages. It was the largest sum claimed in English legal history.

The action was financed by Chicago-based litigation funder Gerchen Keller Capital, LLC, now owned by Burford Capital, which said it would provide up to £40m. According to court documents, the funder stood to receive at least £135m - or 30% of the proceeds of the case up to £1bn plus 20% of the proceeds over £1bn. 

However, ruling in Walter Merricks CBE v MasterCard Inc and Others, Mr Justice Peter Roth dismissed the claimant’s application to certify the proceedings under the Competition Act 1998. The tribunal accepted MasterCard’s arguments that, even if loss had been suffered and could be estimated across the whole class, there was no way of ensuring that a class member would receive distribution of an amount compensating any actual loss suffered.

Merricks is considering an appeal. 

The case was one of the first to be brought under the Consumer Rights Act 2015, which provides for so-called ‘opt-out’ collective proceedings on behalf of a class of individuals. 

Magic circle firm Freshfields, which acted for MasterCard, said the judgment is an important development for the UK’s collective actions regime. ’Additional clarity has been given as to the criteria to be satisfied and the evidence required to grant certification of collective actions in the UK. The judgment also addresses the terms of funding arrangements that can be used by those bringing collective actions.’

In a statement, Merricks said he was surprised and disappointed by the judgment. 'The new collective action regime was introduced by the Consumer Rights Act to overcome the difficulty for consumers seeking to recover losses from competition law infringements. I am concerned that this new regime, designed to benefit consumers, may never get off the ground. I am actively considering with my advisers and litigation funders the possibility of an appeal.'

John Schmidt, partner at international firm Shepherd and Wedderburn, described the ruling as ‘a very big win’. ’This case was brought under new rules under the Consumer Rights Act allowing for an entire class of consumers to be bundled into one case – like a US-class action – and is only the second case of its kind. However, the judgment demonstrates that the court is quite restrictive in allowing these cases. There will be more, but the courts are interventionist in the sense of ensuring that such cases remain manageable and do not get blown out of proportion.’

Future collective claims would be based on smaller classes of customers with higher value items rather than broad and market-wide consumer claims, he said. 

Paul Walsh, partner at international firm Hill Dickinson said the decision does not close the door to collective proceedings in matters which the CAT may consider more suitable, but indicates that only certain types of claim will meet the criteria and that any fears of a raft of collective actions in the near future are premature.

MasterCard still faces legal battles with retailers over charges for card transactions.

Paul Harris QC of Monckton Chambers, Nicholas Bacon QC of 4 New Square and Victoria Wakefield of Brick Court Chambers, instructed by Quinn Emanuel Urquhart & Sullivan, appeared for the applicant.

Mark Hoskins QC, Tony Singla and Hugo Leith of Brick Court Chambers and Matthew Cook of One Essex Court Chambers, specialist cost Counsel Ben Williams QC and Roger Mallalieu of 4 New Square Chambers represented MasterCard. They were instructed by a Freshfields team led by partners Jon Lawrence, Jonathan Isted, Mark Sansom and Nick Frey, associate Lauma Skruzmane and solicitors Simon Duncombe, Ingrid Rois and Amy Rawson.