Eleanor Leedham, Senior Associate, examines the UK’s new opt-out class action regime for competition claims, including the various arguments surrounding the domicile date which determines the number of claimants.
Eleanor’s article was published in New Law Journal, 20 May 2022, and can be found here.
In March this year, the United Kingdom’s Competition Appeal Tribunal (the “Tribunal”) determined that around 3 million deceased persons are automatically part of a class of 46 million on whose behalf Mr. Walter Merricks, former head of the Financial Ombudsmen Service, is claiming paid higher prices because of excessive fees charged by MasterCard. Each member of the class could potentially receive around £300, should Mr. Merricks succeed in the proceedings.
The Tribunal’s judgment on consequential matters follows a case management conference (“CMC”) that took place on 14 January this year. Lawyers for Mr. Merricks, acting as representative for the consumer class, sought clarification from the Tribunal concerning the “domicile date”, which is the date specified in a collective proceedings order (a ”CPO”) for the purposes of determining whether a person is domiciled in the United Kingdom. A CPO is the order by which the Tribunal authorises a class representative to act as such in the collective proceeding action and sets out certain details, such as the parties, the definition of the class, the common issues to be determined and the remedy sought. The domicile date operates to determine which persons who fall within the class definition are automatically included in the proceedings unless they opt-out, and which persons will only be included if they opt-in.
Lawyers for Mr. Merricks argued the domicile date for the proceedings should be the date on which the claim form was issued, 6 September 2016 (the “Issue Date”); lawyers for MasterCard argued that the domicile date should be 18 August 2021, the date the Tribunal granted a CPO. As the domicile date was determined to be the Issue Date, all individuals who otherwise meet the class definition and were alive on 6 September 2016 are within the class. If the domicile date had been determined to be the date the CPO was granted, individuals alive on 6 September 2016 but who died before 18 August 2021 would have been excluded from the class.
Whilst sceptics may say that the conscription of ignorant claimants, who are no longer living this instance, on an ‘opt-out’ basis is in some way wrong, the thwarting of another attempt by a defendant to attempt to restrict the ability of consumers to receive compensation fosters confidence in the Tribunal’s collective regime. As Mr. Justice Roth explained in his judgment of 9 March 2022: “The reason why Mr. Merricks seeks specification of the claim form date is because some three million people with valid claims when these proceedings were started will have died by 2021 and would otherwise be excluded”.
Over many years, MasterCard has faced various legal challenges in respect to the excessive fees it charges, mostly concerning consumers’ cards. As a result of prolonged regulatory investigations in Europe and a more recent Supreme Court judgment in the United Kingdom, ‘Multi-lateral Interchange Fees’ (“MIFs”) levied by MasterCard and Visa, recognised as the two leading payment networks in the world, have been found to be anti-competitive, and therefore unlawful. It is alleged that those in the Merricks class have been affected through paying higher retail prices to more than half a million businesses in the United Kingdom that accepted MasterCard credit or debit cards between 1992 and 2008, who it is claimed passed the unlawful and excessive fees on to consumers.
Given the slow progression of the Merricks proceedings owing to the initial refusal of the Tribunal to grant a CPO and subsequent appeals process, which were not the fault of the class, it appears entirely reasonable that MasterCard has not been able to benefit from a huge decrease in the size of the claim – up to £2.7 billion, which was clearly set out in a claim form served in September 2016.
Competition and collective redress lawyers eagerly watch this space as the shape of the UK landscape for opt-out actions continues to emerge. A number of applications for CPOs were prepared whilst the Merricks case was making its way through a drawn-out appeals process. However, importantly, the 9 March judgment emphasised that the CAT reached its decision “on the particular circumstances of this case”, adding:” …for CPO applications in the future, it is undesirable for the class definition to depend on the domicile date. The two concepts should be kept separate, and the domicile date limited to its particular statutory purpose.”
Last year, the Tribunal permitted Mr. Justin Le Patourel, acting as representative for the class, to bring an action totalling nearly £600 million on behalf of 2.3 million landline-only customers against BT, alleging it charged vulnerable customers unlawfully high landline rates. The collective action automatically includes all affected customers – including those who are now deceased – unless they actively choose to opt-out. BT attempted to appeal the decision of the Tribunal to the Court of Appeal but, on 6 May 2022, the Court of Appeal ruled that the proceedings should continue on an opt-out basis. The appeals court said: “The power to order opt-in or opt-out proceedings is one for the tribunal to make upon the basis of all the circumstances of the case.”
The intention of the consumer group behind the proceedings, and Mr. Le Patourel, was that the estates of deceased class members were included within the claim. The definition of the proposed class and the expert report were drafted accordingly, which contrasts with Mr Merricks’ action, in which the class representative subsequently sought to amend the claim form to permit claims on behalf of people who have died after the proceedings began to be continued by the personal/authorised representatives of their estates. In January’s CMC, lawyers for Mr. Merricks told the Tribunal that MasterCard would gain up to £180 million a year if claims of deceased class members were not allowed to be continued as such.
Lawyers may also note the recently conditionally granted CPO in the Ro-Ro collective claim, filed by Mr. Mark McLaren, by way of distinction. In its judgment, another of particular note for those preparing opt-out collective cases, the Tribunal again dealt with the inclusion of deceased consumers within the class. In these proceedings, the class representative was not permitted to amend his claim form to include potential class members who had passed away prior to proceedings being issued, due to the expiry of the relevant limitation period. In its 9 March determination in Merricks, however, the Tribunal granted Merricks’ permission to amend his claim form to allow the claims of those who have died after the proceedings began to be continued by their estates.
Mr. Merricks’ proceedings should not be confused with the application(s) for a CPO, said to be filed imminently in the Tribunal against MasterCard and Visa on behalf of travel and hospitality businesses, alleging that the card schemes exploit their dominant position in the market charging up to 1.8% per transaction on corporate credit cards. The writer understands that two companies are bringing the proceedings in the Tribunal: Commercial and Inter-Regional Card Claims I Limited and Commercial and Inter-Regional Card Claims II Limited, with the claim reported as exceeding £1.5 billion in repayment of MIFs, which make up most of the Merchant Service Charge (“MSC”) banks charge on card payments. Businesses in the travel and hospitality sectors that generate less than £100m in turnover will be automatically registered with the claim but given the opportunity to opt-out. Companies with more than £100m of turnover will need to opt-in to the legal challenge. As of 9 May 2022, a summary of the CPO application(s) had not been published on the Tribunal’s website.
The Tribunal’s decisions demonstrate that the Tribunal’s gatekeeper role is a serious one. Since the first opt-out certification of Mr. Merricks’ claim in August 2021, after five years of limited advancement, the Tribunal has certified five more opt-out collective claims, with other applications for CPOs listed to be heard in the next few months. The Tribunal’s decision in the Forex litigation on 31 March 2022, was its first refusal to certify opt-out collective proceedings since its earlier refusal in the course of Mr. Merricks’ case.
As of 18 May 2022, MasterCard is now directly petitioning the UK Court of Appeal to hear the case due to the legal questions at stake.