Introduction

Mastercard Incorporated & Ors v Merricks ([2020] UKSC 51) is a landmark judgment by the United Kingdom Supreme Court that delves deep into the procedural intricacies governing collective proceedings under the Competition Act 1998. The case centers on defining the appropriate standards for certifying collective actions, particularly focusing on the suitability of claims for aggregate damages and their distribution among class members. This commentary unpacks the case's background, the Supreme Court's analysis, and its broader implications for future collective litigation in the realm of competition law.

Summary of the Judgment

The appellant defendants, comprising members of the Mastercard group, appealed against the Competition Appeal Tribunal's (CAT) refusal to certify a collective proceeding initiated by Mr. Walter Merricks. Mr. Merricks sought to represent approximately 46.2 million UK consumers in a class action claiming that Mastercard's multilateral interchange fees (MIFs) constituted anti-competitive behavior, leading to higher costs for consumers. The CAT declined certification on grounds that the claims were not suitable for an aggregate award of damages and that the proposed distribution method did not align with the compensatory principle.

The case progressed to the Court of Appeal, which found five legal errors in the CAT's decision, leading to the successful appeal. However, due to the death of Lord Kerr before the judgment was handed down, the Supreme Court constituted a new panel. Lord Sales and Lord Leggatt, in a separate judgment, disagreed with Lord Briggs (who had supported the appeal) and upheld the CAT's decision, leading to the dismissal of the appeal. Thus, the Supreme Court ultimately upheld the CAT's refusal to certify the collective proceedings.

Analysis

Precedents Cited

The judgment references significant precedents, notably the Canadian cases Pro-Sys Consultants Ltd v Microsoft Corpn [2013] SCC 57 and Ewert v Nippon Yusen Kabushiki Kaisha [2019] BCCA 187, which deal with the certification of collective proceedings. The UK Supreme Court contrasted these with the UK statutory framework, emphasizing the unique aspects of the UK Competition Act and the CAT's role in certification.

Legal Reasoning

The core of the legal reasoning revolves around the interpretation of the suitability criteria under the Competition Act 1998 and the CAT Rules. The CAT must assess whether claims are suitable for collective proceedings by considering factors such as the feasibility of aggregate damages calculation and the methods of distributing such damages. The Supreme Court majority, led by Lord Briggs, identified errors in the CAT's approach:

• The CAT incorrectly treated the suitability for aggregate damages as an absolute hurdle rather than a factor in a balancing test.
• The CAT failed to adhere to the compensatory principle, which demands that damages should aim to compensate claimants for their individual losses as far as practicable.
• The CAT misclassified a key issue (merchant pass-on) as not being a common issue, which undermined its suitability assessment.

Lord Sales and Lord Leggatt, however, dissented, defending the CAT's stricter approach to certification, particularly concerning the aggregate damages suitability.

Impact

This judgment delineates the boundaries of the collective proceedings framework under UK competition law. By upholding the CAT's stringent standards, the Supreme Court emphasizes the necessity for precise and practicable methodologies in quantifying aggregate damages. This ensures that only well-substantiated collective actions proceed, safeguarding defendants from unfounded large-scale claims and maintaining the integrity of the competition law enforcement mechanism.

Future cases will likely refer to this judgment to determine the adequacy of claim formulations in collective proceedings. It underscores the importance of robust evidence and realistic damage quantification methods in securing certification.

Complex Concepts Simplified

Collective Proceedings

Collective proceedings, akin to class actions, allow multiple claimants with similar grievances to pool their claims into a single lawsuit. This mechanism is particularly beneficial in competition law cases where numerous individuals or businesses may suffer minor losses, making individual litigation impractical.

Aggregate Damages

Aggregate damages refer to a lump sum awarded on behalf of all class members, calculated based on the collective loss rather than individual losses. This approach simplifies the compensation process but raises concerns about equitable distribution among class members.

CAT's Certification Role

The Competition Appeal Tribunal (CAT) serves as a gatekeeper for collective proceedings under the Competition Act. It assesses whether the claims meet specific criteria, such as commonality of issues and suitability for aggregate damages, before allowing the proceedings to advance.

Compensatory Principle

The compensatory principle mandates that damages awarded should aim to place the claimant in the position they would have been in had the wrongdoing not occurred. In collective proceedings, this principle complicates damage allocation, as aggregate damages must somehow reflect individual losses across a vast class.

Conclusion

Mastercard Inc & Ors v Merricks [2020] UKSC 51 underscores the critical balance between facilitating access to justice through collective proceedings and ensuring the integrity of such mechanisms by enforcing rigorous suitability standards. The Supreme Court's upholding of the CAT's refusal to certify the collective proceeding in this case serves as a precedent, highlighting that collective actions must be underpinned by robust and practicable methodologies for damage quantification. This ensures that collective proceedings remain a viable and fair avenue for redress without becoming a tool for speculative or disproportionate litigation.

Legal practitioners must now exercise heightened diligence in structuring collective claims, ensuring that methodologies for damage assessment are both credible and executable. Moreover, the distribution mechanisms for any aggregate damages awarded must align as closely as possible with the compensatory principle to maintain fairness and equity among class members.