On 24 February 2025, the Competition Appeal Tribunal (“CAT”) gave an oral Ruling approving a proposed settlement of the collective action brought against Mastercard by Walter Hugh Merricks CBE, acting as class representative for consumers in the UK. The Tribunal approved a settlement negotiated between the solicitors for the parties under which Mastercard agreed to pay £200 million in full and final settlement of the collective action.
The settlement brings to an end almost 9 years of hard-fought litigation at all levels, including the Supreme Court.
Background
The case stemmed from the European Commission’s 2007 finding that Mastercard’s EEA multilateral interchange fees (“MIFs”), charged between 1992 and 2007, violated Article 101 of the EU Treaty by unlawfully fixing prices and trading conditions.
In September 2016, Mr Merricks filed the collective action on behalf of approximately 44 million UK consumers who allegedly paid inflated retail prices due to these fees being passed on by card acquirers to retail businesses in the form of higher merchant service charges and then, in turn, passed on by businesses to consumers in the form of higher retail prices. The pleaded claim covered purchases made from 1992 to 2008 and was alleged to include also a ‘run-off period’ to mid- 2010.
The case was unprecedented in scale, seeking an aggregate award of damages totalling £14 billion, the largest damages claim ever brought in the UK. Allowing for the claimed interest to 2025, the claim would be worth close to £20 billion. Crucially, however, the vast majority of the claim value relied on establishing that the infringement found by the Commission, which was limited to EEA MIFs (i.e. fees applying to transactions with an intra-EEA cross-border element), had also affected the level of domestic interchange fees (i.e. fees applying to transactions with no cross-border element).
Mastercard’s defence of the collective action
The litigation faced numerous hurdles over nearly a decade. In 2017, Mastercard was successful in resisting Mr Merricks’ original application for a collective proceedings order (“CPO”). The Tribunal accepted that there was (and would be) insufficient evidence to demonstrate causation and quantify damages. Following a successful appeal (resolved ultimately by the Supreme Court in 2020), Mr Merricks obtained a CPO.
Mr Merricks was then, however, unsuccessful in key judgments on limitation (barring all claims before 1997, subject to a potential appeal) and factual causation.
As regards factual causation, the Tribunal concluded in 2024 that the level of EEA MIFs had not in fact had any effect on the level of domestic interchange fees: see Merricks v Mastercard [2024] CAT 14. This left open the possibility for Mr Merricks to contend that, had EEA MIFs been set to zero, this would then have dragged down interchange fees (referred to as “counterfactual causation”). For its part, Mastercard raised defences that would apply to reduce or eliminate any loss (as regards both the very large claim in respect of domestic interchange fees and as regards the smaller claim in respect of EEA MIFs.
Mr Merricks also faced the hurdles of establishing both pass-on of higher interchange fees into higher merchant services and, distinctly, pass-on of higher merchant service charges into higher retail prices.
Settlement Agreement
In December 2024, in the course of a trial relating to pass-on issues, Mr Merricks and Mastercard reached a settlement agreement. The litigation funder standing behind Mr Merricks, Innsworth Capital, objected to the settlement. It argued that the settlement sum was too low and that Mr Merricks should have pressed on, seeking to exert greater pressure on Mastercard to pay a higher amount.
Irrespective of any objection, the settlement required the approval of the CAT under Rule 94 of the Tribunal Rules. Under that Rule, the Tribunal must be satisfied that the proposed settlement of a collective action is “just and reasonable”.
During the course of a 3-day hearing between 19 and 21 February 2024, the Tribunal heard submissions in favour of the settlement from Mr Merricks and Mastercard, along with submissions in opposition from Innsworth Capital. On the final day of the hearing, the Tribunal gave a short oral Ruling (with written reasons to follow), stating that it had “no doubt” that the level of the settlement was just and reasonable in the circumstances.
The Tribunal also received written and oral submissions on the question of how the £200 million settlement sum should be distributed, including as to the amounts that should be available to pay down the legal fees incurred by the funder and to provide a commercial return on its funding. No oral Ruling was provided on these distribution issues.
Comment
This is the largest settlement yet to come before the CAT under its approval regime. It is also the first settlement that has faced substantial opposition and required a multi-day hearing. The written Ruling will be awaited with great interest by parties and lawyers involved in collective proceedings, not least for the guidance it may provide as to the nature and extent of the CAT’s scrutiny of proposed settlements. The Tribunal heard submissions on the approach it should take to evaluating the merits of highly complex collective proceedings and, in particular, the prospects of the class representative obtaining a higher or lower amount were the claim to proceed to final resolution, along with the value to be attributed to avoiding risk and delay.
The Tribunal’s decision and reasoning on distribution may also prove significant, bearing in mind the competing interests of class members and litigation funders when it comes to dividing the spoils of settlement.
Mastercard was represented by Sonia Tolaney KC, Matthew Cook KC and Owain Draper, instructed by Freshfields.