Introduction

The case Merricks v. Mastercard Incorporated & Ors ([2018] EWCA Civ 2527) was adjudicated by the England and Wales Court of Appeal (Civil Division) on November 13, 2018. This landmark case revolves around the ability to bring collective proceedings under the Competition Act 1998 (CA), as amended by the Consumer Rights Act 2015 (CRA), specifically addressing the procedural and substantive requirements for obtaining a Collective Proceedings Order (CPO) in competition law disputes.

Mr. Walter Hugh Merricks CBE, acting as the appellant, sought to represent a vast class of consumers in a collective lawsuit against Mastercard Incorporated and its affiliates. The central issue was whether the Tribunal had the jurisdiction to refuse the CPO based on the criteria set out in the CA and whether the proposed methodology for calculating aggregate damages was methodologically sound and legally permissible.

Summary of the Judgment

The Court of Appeal upheld the Tribunal's decision to refuse the CPO, affirming that the proposed collective proceedings did not meet the eligibility criteria outlined in section 47B(6) of the CA. The Tribunal found that the methodology proposed by Mr. Merricks for calculating aggregate damages—namely, a top-down weighted average pass-through—lacked sufficient data support and did not provide a practicable means for determining individual compensatory losses. Consequently, the Tribunal concluded that the claims were unsuitable for collective proceedings, thereby denying the authorization required to advance the lawsuit on behalf of the proposed class.

Additionally, the Court of Appeal addressed jurisdictional challenges regarding the Tribunal's decision. It concluded that decisions to grant or refuse a CPO fall within the ambit of section 49(1A) of the CA, thereby granting the Court of Appeal the authority to hear appeals on points of law arising from such decisions.

Analysis

Precedents Cited

The judgment extensively referenced the Supreme Court of Canada's approach in Pro-Sys Consultants Ltd v. Microsoft Corp. [2013] SCC 57 regarding class actions. This precedent was pivotal in assessing the suitability of collective proceedings and the robustness of the proposed methodology for aggregate damage calculations. Additionally, the Court considered the precedent set in Enron Coal Services Ltd (in liquidation) v. English Welsh & Scottish Railway Ltd [2009] EWCA Civ 647, which dealt with the Tribunal's jurisdiction in similar contexts.

Legal Reasoning

The core legal reasoning centered on the interpretation of section 49(1A) of the CA, which governs appeals from decisions in collective proceedings. The Court examined whether the Tribunal's refusal to grant a CPO constituted a decision "as to the award of damages," which would fall under the appealable decisions outlined in the statute.

The Court concluded that the refusal to grant a CPO effectively denied the unique remedy of an aggregate award of damages under section 47C(2), thus fitting within the scope of "decisions as to the award of damages." This interpretation was crucial in determining that the appellant had the right to appeal the Tribunal's decision.

On the substantive merits, the Tribunal's assessment of the proposed methodology was thorough. It highlighted the complexity of accurately calculating an aggregate loss for over 46 million claimants, especially given the variations in individual expenditures, merchant interactions, and product mixes. The Tribunal's reliance on the Canadian precedent underscored the necessity for a sustainable and practicable methodology, which it found lacking in the appellant's approach.

Impact

This judgment has profound implications for collective proceedings under the CA. It reinforces stringent requirements for the eligibility of collective actions, particularly emphasizing the need for robust and transparent methodologies in damage calculations. The decision also clarifies the jurisdictional boundaries of the Court of Appeal concerning decisions related to CPOs, thereby shaping the procedural landscape for future class actions in competition law.

For practitioners, the case underscores the importance of methodological rigor and comprehensive data analysis when proposing collective damages. It also highlights the necessity of understanding the interplay between different sections of the CA and CRA, especially regarding procedural and substantive criteria for collective actions.

Complex Concepts Simplified

Collective Proceedings Order (CPO)

A CPO is an authorization granted by the Tribunal that allows multiple individual claims to be combined into a single collective lawsuit. This mechanism is designed to streamline legal processes, reduce costs, and increase the viability of claims that might be too small to pursue individually.

Pass-Through (Pass-On)

Pass-through refers to the extent to which costs, such as interchange fees (IF), are transferred from one party to another—in this case, from Acquiring Banks to merchants, and ultimately to consumers. Accurately calculating the pass-through rate is critical for determining the aggregate damages owed to consumers.

Weighted Average Pass-Through

This is a method of calculating damages by averaging the percentage of costs that are passed through to consumers across all transactions. While it provides a broad estimate, its accuracy is contingent on the availability and reliability of the underlying data.

Competition Act 1998 (CA)

The CA is a key piece of UK legislation aimed at preventing anti-competitive practices in the market, including anti-competitive agreements and abuse of dominant market positions. It provides the legal framework for regulating competition and facilitating collective legal actions against infringers.

Consumer Rights Act 2015 (CRA)

The CRA amended the CA to introduce provisions for collective proceedings, allowing consumers to band together in legal actions to seek remedies for competition law infringements. This legislative change was intended to enhance consumer protection and streamline legal processes.

Conclusion

The Merricks v. Mastercard Incorporated & Ors case serves as a pivotal reference in the realm of competition law, particularly concerning the procedural prerequisites for collective actions under the CA. The Court of Appeal's affirmation of the Tribunal's jurisdiction to refuse a CPO based on stringent eligibility criteria underscores the necessity for meticulous preparation and robust methodological frameworks in collective legal actions.

Moreover, the judgment clarifies the scope of appellate review in collective proceedings, ensuring that only substantial legal points are escalated to higher courts. This not only preserves judicial resources but also emphasizes the critical role of Tribunals in gatekeeping the suitability of collective actions.

For future litigants and legal practitioners, the case highlights the intricate balance between facilitating widespread consumer redress and maintaining rigorous standards for collective lawsuits. As competition law continues to evolve, the principles established in this judgment will likely guide the structuring and advancement of collective claims, ensuring they meet the requisite legal and procedural benchmarks.