Mastercard Incorporated and others v Walter Hugh Merricks CBE

Certification of competition collective proceedings is not ordinarily a merits inquiry. Suitability is assessed comparatively, by asking whether collective proceedings are preferable to individual claims and whether aggregate damages are preferable to individual assessment. The factors in rule 79(2) form a single balancing exercise; suitability for aggregate damages is a factor, not a separate hurdle. Where breach and some non-nominal loss are triable, difficulty in quantifying damages does not justify denying a trial. The tribunal must do the best it can with the available evidence. Section 47C(2) of the Competition Act 1998 removes the requirement to assess each class member’s loss. Distribution of an aggregate award must therefore be fair and reasonable, but need not correspond to individual loss.

Mr Merricks sought a collective proceedings order to represent an estimated 46.2 million UK consumers in a follow-on competition claim against Mastercard. He alleged that unlawfully high multilateral interchange fees were passed through merchants to consumers in higher retail prices. He sought aggregate damages provisionally estimated at more than £14 billion, to be distributed broadly equally among class members.

The Competition Appeal Tribunal refused certification: [2017] CAT 16; [2018] Comp AR 1. It considered that insufficient data were likely to be available for reliable class-wide quantification and that the proposed distribution method failed to reflect individual losses. The Court of Appeal allowed Mr Merricks’s appeal: [2019] EWCA Civ 674; [2019] Bus LR 3025.

The central issues were the nature of the certification test, the treatment of evidential difficulty in assessing aggregate damages, and whether distribution of an aggregate award had to reflect individual loss.

Disposition

The appeal was dismissed and the application for a collective proceedings order was remitted to the Competition Appeal Tribunal. Lord Briggs delivered the controlling reasons, with which Lord Thomas agreed and which Lord Kerr had approved before his death. Lord Sales and Lord Leggatt agreed that the appeal should be dismissed in the exceptional circumstances following Lord Kerr’s death, although they would otherwise have allowed it on the principal suitability issue.

1. Certification and merits. Certification is generally concerned with whether claims are eligible for collective determination, not with their substantive merits. Strike-out and summary judgment are separately available. The principal exceptions are an application for such relief heard with certification and the consideration of claim strength when choosing between opt-in and opt-out proceedings.

2. Suitability is comparative. “Suitable” in section 47B and rule 79 means suitable for collective rather than individual proceedings. Likewise, suitability for aggregate damages requires comparison with individual assessment. The matters in rule 79(2) are factors in one evaluative balance, not independent hurdles. The Competition Appeal Tribunal therefore erred by treating suitability for aggregate damages as effectively decisive without conducting the required balance. It also failed to give positive weight to the fact that both principal issues, including merchant pass-on, were common issues.

3. Quantification despite evidential difficulty. Once a claimant raises a triable case that an established wrong caused more than nominal loss, the court must quantify that loss as best it can. Incomplete data, difficult interpretation and the need for estimation, extrapolation or informed guesswork do not justify denying a trial. The same problems would have confronted individual consumers, whose claims were economically impracticable. The tribunal’s failure to apply this broad-axe principle was its most serious error.

4. Aggregate damages and distribution. Section 47C(2) of the Competition Act 1998 expressly modifies the compensatory principle by dispensing with individual assessment. Nothing restores that requirement at the distribution stage. Distribution must be fair and reasonable, but may be equal or otherwise unrelated to individual loss where individualised distribution would be impracticable or disproportionate.

5. Procedure. Expert questioning and limited cross-examination will be rare at certification but were permissible in this unusually large and complex case. Distribution proposals will often be premature, although the tribunal may consider them as part of the overall scheme. An inappropriate proposal will ordinarily be addressed later rather than used to refuse certification.

6. Minority reasoning. Lord Sales and Lord Leggatt considered suitability to be an independent, non-comparative requirement. In their view, the representative had to demonstrate a realistic prospect that a reasonable and fair methodology could assess class-wide loss using available or likely data. They considered that the tribunal had lawfully found that requirement unsatisfied, while agreeing that its insistence on loss-corresponding distribution was erroneous.

1. United Kingdom Supreme Court: The appeal was dismissed and the application for a collective proceedings order was remitted to the Competition Appeal Tribunal: [2020] UKSC 51.
2. Court of Appeal: Mr Merricks’s substantive appeal was allowed because the tribunal’s refusal of certification involved errors of law: [2019] EWCA Civ 674; [2019] Bus LR 3025.
3. Court of Appeal: On a preliminary issue, the court held that it had jurisdiction to hear the certification appeal: [2018] EWCA Civ 2527; [2019] Bus LR 1287.
4. Competition Appeal Tribunal: The application for a collective proceedings order was refused because the claims were considered unsuitable for aggregate damages and the proposed distribution did not reflect individual loss: [2017] CAT 16; [2018] Comp AR 1.