The highest-profile attempt to utilize the new U.K. regime for consumer class actions has come to a grinding halt. The case involved a claim alleging that MasterCard’s fee structure had resulted in overcharges to tens of millions of U.K. consumers. On July 21, 2017, the Competition Appeal Tribunal, newly re-organized to oversee the consumer class action regime, declined to grant the necessary collective proceedings order that would have allowed the action to go forward. The tribunal’s ruling is highly fact-specific and its decision to decline the collective proceedings order very much reflects the specific features of the claims against MasterCard, but the ruling nevertheless does raise concerns about the viability of the class action regime and its attractiveness to prospective claimants in other cases. A copy of the Tribunal’s July 21, 2017 order can be found here.



In 2015, the U.K. Parliament enacted The Consumer Rights Act of 2015, which represented a comprehensive overhaul of the U.K.’s consumer protection and unfair trade practices laws. Among many other changes, the Act introduced an “opt-out” collective action mechanism. In particular, the Act broadens the jurisdiction of the Competition Appeal Tribunal, including the introduction of procedures for the tribunal to hear damages claims on an “opt-out” collective action basis. The Act also includes provisions for collective settlements and collective redress schemes.


As discussed here, in July 2016, Walter Hugh Merricks, a representative claimant, represented by the U.S-based law firm Quinn Emmanuel and financed by Chicago-based litigation funding firm Gerchen Keller Capital LLC, initiated proceedings against MasterCard in the Competition Appeal Tribunal on behalf of consumers under the Consumer Rights Act.


The action against MasterCard was based upon the November 2014 ruling of Europe’s top court, the European Court of Justice, in which the court dismissed the appeal of MasterCard and related entities. The dismissal of the appeal left standing the General Court of the European Union’s determination that MasterCard had over a 16 year period used its predominant position in the consumer credit card market to extract excess “interchange fee” from cardholders (costs imposed on retail businesses in order to be able to accept the credit cards and have their transactions processed; the fees are incorporated into the price consumers pay for goods and services). The action was filed on behalf of over 46 million U.K. consumers who had used the MasterCard for purchase transactions and sought damages of “as much as £19 billion.”


As required under the Consumer Rights Act, the claimant filed an application for a collective proceedings order, to enable the continuation of collective proceedings on an opt-out basis. MasterCard opposed the application on two bases: first, on the grounds that the case was unsuitable for a collective proceedings order; and second, that as a result of provisions of the relevant litigation funding arrangement, the representative claimant should not be authorized as a class representative.


The July 21, 2017 Judgment

In its July 21, 2017 Judgment, the Tribunal dismissed the application for a collective proceedings order. In reaching this determination, the Tribunal considered the relevant portion of the Act and applicable rules specifying that in certification of claims to proceed on a collective basis requires (i) that the claims raise ‘common issues’; and (ii) that the claims are suitable for collective proceedings.


In consideration of these issues of commonality and suitability, the Tribunal considered the nature of the class claims and the proposed composition of the class, including, for example, how damages are to be calculated given the very individual way different consumers may use their credit cards. This portion of the Tribunal’s order is extensive, detailed, and very fact-specific.


The problem with these kinds of issues for purposes of the application is that they turn on very individual considerations. The Tribunal noted that “that in itself does not mean that this case is unsuitable for a CPO.” The Act does not, the Tribunal noted, require that all significant issues must be common issues, nor indeed (by contrast to the requirement in the U.S. under the Federal Rules of Civil Procedure) that common issues should predominate over individual issues. What is required, the Tribunal said, is that the claims be “suitable to be brought in collective proceedings.”


The applicant argued that the problems of individuality could be addressed by arriving at an aggregate award of damages and then distributing the damages to class members. The Tribunal said it must determine whether a sustainable methodology can be applied in practice to calculate a sum which reflects an aggregate of individual claims for damages, and a reasonable and practicable means for estimate the individual loss can be used as the basis for distribution.


After due consideration of the proposals and arguments on these issues, the Tribunal concluded that in this case “there is no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant from the aggregate loss calculated according to the Applicant’s proposed method.” Because of the “significance of individual issues” it is “impossible in this case to see how the payments to individuals could be determined on a reasonable basis.” Accordingly, the Tribunal concluded that “these claims are not suitable to be brought in collective proceedings.”


The Tribunal did note the argument advanced by the applicant that because it would be impractical for the members of the class to bring their claims on an individual basis, the denial of a collective proceedings order would mean that individuals who suffered loss would get no compensation. The Tribunal noted that “that is effectively the position in most cases of widespread consumer loss resulting from competition law infringements,” but that “does not mean that an application to bring collective proceedings in such a case must always be granted.” Every case “has to be considered on its own terms, having regard for statutory arrangements.”
Having concluded that the application was not suitable for a collective proceedings order, there was no practical need for the Tribunal to consider MasterCard’s second argument against the application having to do with the authorization of the proposed class representative. However, because the issue had been fully argued, the Tribunal addressed this second issue as well.


MasterCard’s objection to the representative related not to his personal qualification, but rather had to do with the various features of the litigation funding agreement in reliance on which he was proceeding. In particular, MasterCard raise concerns about the way in which any costs liability would be funded. In considering this objection, the Tribunal extensively reviewed the particulars of the litigation funding arrangements. In response to various specific concerns raised in the course of the proceedings, the representative and the litigation funder proposed amendments to the funding agreement. The proposed amendments were presented to the Tribunal. The Tribunal concluded, that if it had determined that a collective proceedings order were appropriate, it would have, if the funding agreement were amended as proposed, authorized the applicant to proceed act as the class representative.



According to the July 21, 2017 Reuters article about the Tribunal’s ruling, had it been allowed to proceed, the case “would have been the largest and most complex in British legal history” and would have “tested the limits” of the new Consumer Rights Act. It would have also provided the most extensive test-run for the new opt-out procedures.


On the other hand, with the Tribunal’s ruling that the case cannot go forward as a collective proceeding, questions now surround the future of the Act’s procedures. A July 21, 2017 Bloomberg article (here) quotes one commentator as saying “This is a real setback for the collective proceedings regime,” adding that “it may well deter other potential class representatives from seeking to act on behalf of potential claimants and incurring the time and expense of becoming a representative in such cases.” The Bloomberg article also notes that the MasterCard case is actually the Tribunal’s second decision in which it declined to allow collective proceedings to proceed, having declined an application in a case involving an American manufacturer earlier this year.


The Tribunal’s ruling may not be the final word; the Reuters article reports that the class representative is considering an appeal.


It was interesting to see the Tribunal wrestle with class action issues in what almost amounts to a state of nature. In the U.S., decades of extensive case law surround the kinds of class action questions that the Tribunal was addressing, such as commonality and suitability. There is extensive case law in the U.S. dealing with how the question of whether problems in establishing individual damages should affect class certification procedures. The Tribunal faced all of these issues as a matter of first impression.


The interesting question is how the Tribunal’s determination will affect future prospective claimants considering whether or not to try to proceed in the form of a collective proceeding under the Act. In that regard, it is worth considering how this case got launched in the first place; it went forward on the initiative of a U.S.-based law firm and financed by a U.S.-based litigation financing firm. The U.S. has an entrepreneurial and opportunistic plaintiffs’ bar that is comfortable using class action procedures, which helps explain why U.S. actors took the initiative to try to use the new Act as was done here. But now that the initiative has been shut down, it is hard to see the prospective actors in the U.K. having much encouragement to try to take up a new initiative on their own. It is hard to see how this ruling will not have a dampening effect on enthusiasm for new initiatives.


On the other hand, the  suggestion that the Tribunal’s ruling means that the new class action regime may never get off the ground may be overstated. The Tribunal’s ruling was very fact specific and very much tied to the nature of the claims asserted against MasterCard – specifically, about the way it was claimed that MasterCard’s actions had harmed consumers. It could be argued that there is nothing about the Tribunal’s ruling that means that other consumers in other circumstances might not succeed in obtaining a collective proceedings order.



The second part of the ruling having to do with litigation financing is interesting. The Tribunal reviewed the litigation funding agreement in detail and considered the specific features of the agreement’s arrangements. The specifics of the agreement and the court’s analysis of the agreement will be of interest to anyone curious about how these kinds of arrangements work. The very public examination of the funding arrangement presents quite a contrast to the way litigation funding is treated in the U.S., where there is still a debate about whether or not funding arrangements should even be discoverable. By contrast, the Tribunal’s inquiry here about the funding arrangements presumed that the funding arrangements are relevant and subject both to adversarial challenge and to judicial scrutiny. This seems likely an important example for courts in other jurisdictions (including in particular in the U.S.) as they address issues arising from the involvement of litigation funding.


When this case was first launched, I had suggested that it brought together several different global litigation trends: it evidenced the global rise of collective actions; it represented an example of how U.S. law firms were leading the charge in the growth of collective actions; and it underscored the growing role of third-party litigation funding. The claimant’s setback in this case does not mean that these trends have been eradicated; it does however mean that the playing out of these trends is subject to fits and starts, and that the resulting pace of change will vary. In any event, it will be interesting to see what happens next with in the U.K., and whether or not other actors will seek to utilize the Act’s class action procedures.