Multi-party claims are on the rise. And in a UK-first, last month the Competition Appeal Tribunal (CAT) permitted a massive £14 billion opt-out consumer claim against Mastercard to go forward to trial.

Merricks v Mastercard has attracted nationwide attention as the UK’s biggest mass consumer class action-style litigation. Brought by former Financial Ombudsman Walter Merricks, the claim centres on fees imposed by Mastercard between 1992 and 2008 which it is alleged were passed on to consumers in higher retail prices.

Following an unsuccessful attempt to get the claim off the ground in 2017, Merricks has now secured a collective proceedings order to pursue the case. The collective proceedings regime, a “notable innovation” by the CAT’s own admission, enables businesses and consumers to seek compensation for harm suffered from anti-competitive behaviour. Eligible UK consumers who do not opt out of the claim will automatically qualify for compensation, similar to the US-style class action.

The case is one to watch as the parties now work towards trial and we think will throw up many novel issues along the way. Points of particular interest coming out of the most recent hearing include:

  • The new funding terms, which the CAT had to consider following a change in Merricks’ litigation funder. The new arrangement largely found favour with the CAT, with adverse costs cover having increased from £10m to £15m and own costs and disbursements cover from £33m to £45.1m. The CAT noted this as particularly significant in the context of Merricks’ £32.5m costs budget and was comfortable that the increase in cover allowed for a substantial excess.
  • The adequacy of the adverse costs protection afforded to Mastercard through Merricks’ funding agreement. The CAT expressed concerns that any adverse costs award would normally be made against Merricks, who naturally lacks the means to pay any, inevitably very substantial, costs order. A further concern was that the funder is based outside the jurisdiction, in Jersey. Ultimately the funder agreed to provide an undertaking to discharge any adverse costs liability and the CAT was satisfied with that approach.
  • The CAT’s approach to potential points of conflict between the funder and the class member. It took no issue with the settlement provisions of the funding agreement, which ultimately allow Merricks himself to determine whether to accept or reject a proposed settlement. But the CAT did take issue with the termination provisions which it said gave the funder too broad a discretion to terminate funding. The funder agreed to narrow the relevant wording so that any decision to terminate must be based on independent legal and expert advice, and the CAT was satisfied with that change.
  • The CAT’s refusal to extend Merricks’ class of claimants to include deceased persons, which would have increased the class size by approximately 13.6 million people . It also refused Merricks’ claim for compound interest which alone would add some £2.2 billion to the total award sought.

The judgment represents a big step forward for UK consumer group class action-style claims, which are inherently complicated and difficult to run. It is also a crucially important judgment for third party litigation funders in understanding how best to structure their funding agreements to support large-scale litigation. We will watch with interest to see how the case develops, and also whether, and how, the CAT’s collective proceedings regime might provide a template to be rolled out in other tribunals and courts. This case is leading the way in collective proceedings actions and will undoubtedly open the door for other types of complex group claims.