Revisiting the Standards for Aggregate Damages in Collective Proceedings: Merricks v Mastercard

Introduction

Merricks v. Mastercard Incorporated & Anor ([2019] EWCA Civ 674) is a landmark case adjudicated by the England and Wales Court of Appeal (Civil Division). The core issue revolves around the eligibility and methodology for awarding aggregate damages in collective proceedings under the Competition Act 1998, as amended by the Consumer Rights Act 2015. The appellant, Mr. Merricks, sought to represent approximately 46.2 million UK residents in a collective claim against Mastercard and associated entities for alleged overcharges stemming from anti-competitive practices related to multilateral interchange fees (MIFs).

Summary of the Judgment

The Court of Appeal addressed Mr. Merricks' appeal against the Competition Appeal Tribunal’s (CAT) refusal to grant a Collective Proceedings Order (CPO). Mr. Merricks had initiated a collective claim alleging that Mastercard's setting of the EU-wide MIF breached EU competition law, leading to increased costs passed onto merchants and, consequently, consumers. The CAT had refused the CPO primarily due to concerns about the feasibility of calculating pass-on rates and the proposed distribution method of aggregate damages, which did not align with individual losses.

The Court of Appeal scrutinized the CAT’s stringent requirements for evidence at the certification stage, particularly challenging the necessity of detailed individual loss assessments for approval of aggregate awards. Concluding that the CAT had set an excessively high bar, the Court allowed the appeal, nullifying the CAT's refusal and remitting the case for reconsideration.

Analysis

Precedents Cited

The judgment extensively references several key precedents, most notably the Supreme Court of Canada’s decision in Pro-Sys Consultants Ltd v Microsoft Corp ([2013] SCC 57), commonly referred to as the "Microsoft" case. This precedent underscores the necessity for a credible methodology in establishing class-wide loss in collective proceedings, emphasizing that the methodology must possess a realistic prospect of demonstrating common impact without relying on pure conjecture.

Additionally, the CAT’s previous engagement with cases like Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (1914) and the implications of “sound imagination” and “broad axe” methodologies informed the court’s interpretation of acceptable evidence standards for collective claims.

The judgment also contrasts UK case law with Canadian jurisprudence, advocating for the latter's more flexible approach in assessing class-wide damages without necessitating detailed individual loss proofs at the certification stage.

Legal Reasoning

The Court of Appeal's reasoning pivots on the balance between the procedural rigidity imposed by the CAT and the practical necessities of large-scale collective litigation. The CAT had deemed the proposed methodology for calculating pass-on rates as methodologically unsound due to insufficient data availability and the impracticality of individual loss assessments over an extensive infringement period.

However, the Court of Appeal found that under s.47C(2) of the Competition Act 1998, aggregate awards can be made without dissecting individual claims. The appellant had presented a plausible top-down economic model to assess overall loss, relying on industry-wide data and pre-existing litigation insights. The Court posited that the CAT's demand for exhaustive data at the certification stage surpassed the standard for proving a "real prospect of success" as established in precedent.

Furthermore, the Court criticized the CAT for conflating certification standards with trial evidentiary standards, highlighting that the certification stage should focus on the procedural suitability of the claim rather than the substantive merits, which would be addressed at trial.

Impact

This judgment significantly impacts the landscape of collective redress mechanisms under UK competition law. It affirms that aggregate damages can be pursued in collective proceedings without necessitating meticulous individual loss computations at the certification stage. This precedent potentially lowers barriers for large-scale consumer groups to seek redress for anti-competitive practices, fostering a more accessible legal avenue for mass consumer grievances.

Moreover, by aligning the UK approach more closely with Canadian standards, the judgment encourages the adoption of flexible, evidence-based methodologies in collective litigation, balancing the need for efficient legal processes with the equitable distribution of damages.

Complex Concepts Simplified

Multilateral Interchange Fee (MIF)

MIFs are fees charged between banks for processing credit and debit card transactions. In this case, Mastercard set a standardized MIF across the EU, which the EU Commission deemed anti-competitive.

Pass-On Rate

The pass-on rate refers to the extent to which increased costs (due to higher MIFs) are transferred from merchants to consumers in the form of higher prices.

Collective Proceedings Order (CPO)

A CPO allows multiple individual claims to be combined into a single collective action, streamlining the litigation process for claims that share common legal or factual issues.

Aggregate Damages

Aggregate damages represent a total sum awarded to all members of the class, rather than individual compensation based on each claimant's specific loss.

Certification Stage

The certification stage is an initial phase where the court assesses whether the collective claim meets the necessary criteria to proceed as a collective action.

Conclusion

The Court of Appeal's decision in Merricks v. Mastercard establishes a pivotal precedent for collective litigation in UK competition law. By allowing aggregate damages without the prerequisite of detailed individual loss demonstrations at the certification stage, the judgment enhances the feasibility of large-scale consumer claims against anti-competitive practices. This aligns UK legal frameworks with more accommodating international standards, fostering a judicial environment conducive to collective redress and reinforcing consumer protection mechanisms against systemic overcharging by dominant market players like Mastercard.

Ultimately, this decision underscores the judiciary's role in balancing procedural requirements with substantive justice, ensuring that collective claims can effectively serve as instruments for addressing widespread economic harms inflicted by anti-competitive behaviors.