Gatekeeping revisited: First antitrust class action certification decision following UK Supreme Court judgment in Merricks

The UK Competition Appeal Tribunal has today handed down its first class certification judgment following last year’s UK Supreme Court judgment in Merricks v Mastercard.

Although today’s decision does not apply the Supreme Court’s judgment in detail due to the discrete arguments made by Mastercard at the certification re-hearing earlier this year, it nevertheless provides useful insights into how the Tribunal will continue to exercise what the Supreme Court described as the Tribunal’s “important screening or gatekeeping role” over collective proceedings.

The specific issues determined in today’s judgment are relevant not only to the Merricks proceedings, but also to other pending antitrust collective actions before the Tribunal. The impact of the judgment in the Merricks case is to reduce the aggregate amount of the claim against Mastercard by more than £5 billion, before key substantive arguments – in particular, potential preliminary issues in relation to limitation and causation – may be heard in the next phase of the litigation. The judgment therefore illustrates the ability of defendants, in appropriate cases, to invite the Tribunal to significantly reduce the scope of the class definition, or other aspects of the claim, at the certification stage of collective proceedings, prior to consideration of substantive issues at a more suitable later stage.

Compound interest and deceased persons

At the certification re-hearing earlier this year, Mastercard sought to exclude claims for compound interest, and on behalf of deceased persons, from the scope of the proceedings. The Tribunal has today found for Mastercard on both of those points.

On compound interest, the Tribunal has found – with reference to the leading Canadian authority Pro-Sys v Microsoft which was unanimously endorsed by the UK Supreme Court – that Mr Merricks raised no credible or plausible method for estimating compound interest on an aggregate basis, and accordingly that head of claim is not suitable for an aggregate award of damages.

On deceased persons, the Tribunal has found – on the basis of well-established principles of English common law – that persons who are deceased at the time a claim is brought cannot themselves be class members – because their claims are a legal nullity – and in any event that such claims were not originally included within the collective proceedings, and are now time-barred.

These two points will arise in other pending and future collective proceedings before the Tribunal. The impact of their exclusion in the Merricks case is to reduce the aggregate amount of the claim that has been certified by more than £5 billion.

Funder’s undertaking

At the certification re-hearing earlier this year, Mastercard also sought an undertaking to the Tribunal from Mr Merricks’ new funder, Innsworth Capital, that it would discharge liability for any costs ordered against Mr Merricks.

Mastercard sought this undertaking because under the proposed funding arrangements, it would only have had direct contractual enforcement rights against Mr Merricks, who as a private individual would lack the means to pay such costs, and against whom recovery would be greatly complicated in the event his insolvency or other contingency.

The Tribunal agreed with these concerns and made the granting of the collective proceedings order conditional on Innsworth Capital giving a suitable undertaking to the Tribunal as to liability for costs. A similar approach was recently mandated by the Tribunal in analogous circumstances in the proposed Trucks collective proceedings, and is likely to apply in other collective actions where potential funding enforceability issues arise.

Implications and looking ahead

The Tribunal’s judgment re-confirms the important “gatekeeping” role that it will continue to play in the certification of collective proceedings following the UK Supreme Court decision in Merricks last year. That is particularly the case, as the judgment shows, as regards questions of class definition – which necessarily cannot be deferred until a latter stage of the proceedings – and those elements of proposed collective proceedings that are unsupported by any plausible methodology. The Tribunal’s judgment demonstrates that such issues can be very material indeed to the overall size and scope of collective proceedings, and therefore a key battleground.

The next stage of the Merricks proceedings will move to uncharted territory for the nascent antitrust collective actions regime in the UK. This will include key steps such as the finalisation of an appropriate Collective Proceedings Order, related publicity requirements and opt-out/opt-in processes, and potential applications by Mastercard for preliminary issues concerning key matters such as causation and limitation, which if determined in Mastercard’s favour would massively reduce the remaining quantum of the claim and could call into question the appropriateness of its ongoing certification. Separately, the Tribunal will in the coming months make certification decisions in other pending collective actions that will address and implement the UK Supreme Court decision in Merricks in further detail than was necessary in today’s judgment.

Meanwhile, outside of the competition sphere, the UK government is consulting on the possible extension of the antitrust collective actions regime to consumer law. The group and mass claims landscape in the UK and around Europe continues to develop rapidly, and today’s judgment shows that continued developments in the antitrust collective actions regime should be watched carefully by all companies potentially exposed to such mass litigation, including outside of the competition sphere.

Freshfields acts for Mastercard in these proceedings. The team is led by partners Mark Sansom and Nick Frey and counsel Ricky Versteeg, and includes senior associate Ingrid Rois and associate Alexandra Holroyd.