The UK Supreme Court has decided that it will hear an appeal on important points of law arising out of a proposed class action by Walter Merricks CBE against Mastercard under the competition law “collective proceedings” (or class action) regime that was introduced in by the Consumer Rights Act in 2015.
Collective proceedings can only go ahead if the UK Competition Appeal Tribunal (CAT) ‘certifies’ them by granting a Collective Proceedings Order. This is similar to the ‘class certification’ hearings that take place in class action regimes in the United States and Canada. The appeal in this case, which follows a decision by the Court of Appeal earlier this year to overturn the CAT’s original refusal to certify the class action, will go a long way to determining the extent to which class actions in the UK should (as was intended by Government prior to the introduction of the regime) be subject to appropriately robust scrutiny before businesses are exposed to lengthy and potentially costly class action litigation.
As such, the appeal – which is likely to be heard by the Supreme Court some time during 2020 – will be of critical importance to all businesses that operate in or are exposed to litigation risks in the UK, particularly as regards competition law but also potentially, in future, in other areas such as consumer law and product liability that the regime may eventually be extended to cover.
Closing, and then opening, the floodgates?
In 2017, the CAT decided that the very large class action proposed by Mr Merricks – a claim for over £14 billion (reportedly the largest civil damages claim ever brought in the UK) covering some 46 million consumers over a period of more than 16 years ending in 2008 – was unsuitable to be heard in collective proceedings. The CAT was concerned that there would be insufficient data for Mr Merricks to support his claims, and did not accept Mr Merricks’ proposal to treat all class members the same regardless of their particular spending or shopping habits over the period of the claim.
However, having first decided that it could hear an appeal of the CAT’s decision on questions of law, in April this year the Court of Appeal set aside the CAT’s decision not to certify the proceedings, and ordered the CAT to reconsider the certification application applying what it considered to be the correct legal approach. In doing so, the Court of Appeal decided that the CAT should have done no more than ask itself whether the claims had a “real prospect of success” – as it would on a strike out application – and was not entitled to consider difficulties (however insuperable) in distributing any eventual award to the represented class members.
This approach of the Court of Appeal appears, on its face, to be significantly different from what Government and Parliament intended as regards the CAT’s ability to refuse certification of class actions that it considers are unmeritorious and impracticable. This would, in turn, risk opening the floodgates to a broad range of third-party funded class action litigation in the UK. It could also leave the UK faced with a collective actions regime that is very different to the one that was envisaged by lawmakers in 2015 and one that is arguably more permissive even than US class action regimes, despite the Government’s intention when introducing the UK system of avoiding the US regimes’ excesses.
By granting Mastercard permission to appeal the Court of Appeal’s decision, the Supreme Court has ensured that these and other critical issues arising from the Court of Appeal’s judgment will be considered by the UK’s highest court at a relatively early stage of the development of the new collective proceedings regime. This is to be welcomed.
Where are we?
Mastercard’s appeal to the Supreme Court comes at a critical time for the broader collective proceedings regime. Four other proposed collective proceedings are at an early stage before the Tribunal and will be directly affected by the fundamental issues to be considered by the Supreme Court – and some of those proceedings have been placed on hold in the meantime.
The proposed Merricks proceedings themselves remain at an early stage. Although the Supreme Court will consider important legal issues regarding certification, it will not itself determine whether the claims should be certified, or the merits of the underlying claims. Mr Merricks has, for example, publicly announced that he has new third-party funding arrangements in place, and examination of funding arrangements by the CAT is a critical element of the certification process under the new regime. Mr Merricks’ claims also rely on establishing a connection between certain European fees that were the subject of a decision by the European Commission in 2007, and domestic UK fees that were not considered by the European Commission and were set separately by Mastercard. The credibility of that position – and of issues concerning the age of the claims, the earliest of which date back to 1992 – will also need to be tested by the CAT at an early stage of the litigation.
There is no question, however, that the Supreme Court appeal will address issues that are critical to the development of the regime for competition class actions that was introduced in the UK in 2015. Although many other critical aspects of the new regime will also need to be considered and determined by the CAT and the Courts over the coming years, the Supreme Court will in the meantime provide authoritative guidance on important points of principle regarding the certification process at an early and formative stage of its development. All businesses exposed to litigation risk in the UK will therefore need to watch closely and prepare accordingly.
Freshfields acts for Mastercard in these proceedings. The team is led by partners Mark Sansom, Nick Frey and Jonathan Isted and senior associate Ricky Versteeg, and assisted by associates Ingrid Rois and Alexandra Holroyd.
The case continues a long list of Freshfields matters – most recently the ABB and Trucks litigation and Rail Tickets proposed collective actions – that have driven and will continue to drive the development of the law relating to competition damages actions and collective proceedings in the UK.