Bid to sink Mastercard settlement opens at Competition Appeal Tribunal

Today's hearing before the Competition Appeal Tribunal (CAT) in Salisbury Square, London, was always going to make a small bit of legal history. The tribunal is being asked to make an order to settle the first claim to be certified under the collective actions regime enabled by the Consumer Rights Act 2015: Merricks v Mastercard, originally filed in 2016. 

However, there is a twist adding spice to the proceedings. On 23 January, the tribunal granted litigation funder Innsworth Capital permission to intervene in the proceedings. The funder will argue that, contrary to the case presented by the former adversaries, the settlement agreed between class representative Walter Merricks CBE and the Mastercard defendants is not a reasonable settlement of Mastercard's liability. The funder has a considerable stake in the outcome: it has already invested some £45 million in the case. 

Merricks' pioneering collective action followed the European Commission’s 2007 finding that, between 1992 and 2007, Mastercard's 'multilateral interchange fees' breached Article 101 of the EU Treaty which bars direct or indirect fixing of prices or trading conditions. The claim originally sought more than £14bn in damages on behalf of some 45 million Mastercard customers, to be enrolled unless they opted out. After an excursion to the Supreme Court, which dismissed an appeal by Mastercard, the claim was certified by the CAT in 2021. 

In December last year, however, it emerged that the class representative and defendants had agreed a settlement. The parties' joint application for a collective settlement approval order reveals that Mastercard will pay £200 million in full and final settlement. This will be held in a bank account set up by compliance platform Epiq Systems for distribution. 

In an extraordinary development, the order application also reveals that Mastercard has agreed to provide Merricks with an additional £10m 'for use exclusively in relation to any costs incurred/and or the resolution of the arbitral proceedings that are being brought by Innsworth' against him. This follows the funder's announcement in December that it regarded the settlement as premature and far too low. 

In its intervention today Innsworth is expected to oppose the proposed settlement as unreasonable, saying it should have been vetted by an independent expert rather than negotiated behind closed doors. Counsel will tell The Honourable Mr Justice Roth that £200m is not enough to compensate the claimant class and to deter future anticompetitive behaviour. More directly, Innsworth will say the settlement will deter funders from supporting further collective redress claims in the UK: it had expected to receive a floor payback of £179m from the case. 

Whether the CAT is impressed by these arguments, and those of a further intervener, the Access to Justice Foundation, remains to be seen. Everyone agrees we are in unknown territory: 'The hearing could go off in a number of different directions,' one party noted. 

But whatever the outcome, the eight-and-a-half-year Mastercard claim will fuel the wider debate about the expansion of class actions in the UK. 'This case should serve as a wake-up call for policy makers to introduce much stronger measures to protect consumers and businesses involved in the legal system,' said Seema Kennedy OBE, director of the industry-funded lobby group Fair Civil Justice.

Government ministers, alarmed at the potential impact of a wave of car finance mis-selling claims, will be watching too.