The Supreme Court has decided that the Competition Appeal Tribunal (Tribunal) was wrong to reject a £14 billion collective proceedings claim against Mastercard on behalf of 46 million consumers.
The judgment, which was given on 11 December and is the first time that the Supreme Court has considered the collective proceedings regime since its launch in October 2015, will doubtless make it easier for mass competition claims to be brought and will be seen as a triumph for consumers and businesses alike who suffer harm as a result of anti-competitive conduct. Indeed, one of the two dissenting judges considered that the new approach adopted by the majority will “very significantly diminish the role and utility of the certification safeguard”. The judgment will also allow a number of other collective proceedings cases that had been put on hold to move to the next stage.
The collective claim brought by Walter Merricks, a former financial ombudsman, related to a European Commission decision which found that Mastercard had unlawfully fixed the interchange fees that banks issuing Mastercard cards to consumers would charge to banks serving retailers when a consumer purchased goods or services at a retailer. The claim was brought on behalf of all UK adult consumers for an almost 16-year period.
The first main stage in collective proceedings is to apply for what is called a collective proceedings order or “CPO” and it is only if the Tribunal grants a CPO that the collective proceedings can be continued to trial.
At first instance, the Tribunal refused to grant a CPO because it did not think the individual claims were suitable to be brought in collective proceedings on two grounds. First, the Tribunal considered that the claims were not suitable for an aggregate award of damages – this was a new concept introduced specifically for collective proceedings and allows the Tribunal to award an overall amount of damages without determining the amount of loss in each individual case. According to the Tribunal, the class representative’s experts had not shown that they could calculate aggregate damages on a sufficiently reliable basis. Second, the Tribunal considered that the proposal for distributing the aggregate award of damages, which in brief involved an equal split among all consumers in the class, would not have sufficient regard to the differing levels of individual loss and therefore would not satisfy the normal compensatory principles that seek to return the claimant to the same position as if the unlawful act had not occurred.
The Court of Appeal found a number of legal errors in the Tribunal’s judgment, including that the Tribunal had applied too stringent a screening test at the CPO stage when considering the availability of data presented in the expert evidence and that there was no reason for distribution of an aggregate award of damages to be based on the level of compensation actually owed to each individual claimant.
On this first occasion of considering the new regime, the Supreme Court set out some important overarching points that are well worth summarising:
· The collective proceedings regime allows whole classes of consumers and businesses to vindicate their rights to compensation before an expert tribunal.
· The Tribunal is the expert gatekeeper deciding on whether claims should proceed.
· Canadian class action case law is persuasive given Canada’s greater experience of class actions and the similarities between the Canadian and UK regimes. This is important as the Canadian regime typically adopts a light-touch approach to certification.
· The collective regime should not be regarded as imposing restrictions on claimants as a group that would not be imposed when bringing individual claims.
· Once a claimant in an individual action shows that there is a triable issue involving more than nominal loss and passes the strike out and summary judgment tests, the courts do not deprive them of a trial merely because of difficulties in quantifying damages. Courts are perfectly entitled to resort to informed guesswork rather than scientific calculation. It should be no different with collective proceedings.
· When considering whether claims are suitable to be brought in collective proceedings, the relevant question is whether collective proceedings are more suitable relative to with individual claims being brought.
· The collective proceedings regime radically modified how damages can be calculated by introducing aggregate awards of damages.
· CPO applications are not subject to a merits test, although the Tribunal can hear any strike out and/or summary judgment applications at the time of deciding on the CPO application.
After laying out these guiding points, the Supreme Court found that the Tribunal had made a number of legal mistakes at first instance:
· The Tribunal was wrong to treat the suitability of the claims for aggregate damages as if it were a hurdle rather than merely one factor to be weighed in the balance.
· The Tribunal was incorrect when it did not consider suitability in the relative sense and therefore failed to take into account whether individual proceedings were a relevant alternative, which plainly they were not, and whether the same difficulties affecting damages quantification in a collective claim would in any event be present in individual claims.
· The Tribunal failed to take into account the general principle that the court must do what it can with the evidence available when quantifying damages. The Supreme Court considered that claimants in individual actions would equally have faced the same difficulties in quantifying damages as would the class representative in collective proceedings and so this could not be a reason for refusing a CPO.
· The Tribunal was wrong to consider that the normal compensatory principle is essential when distributing aggregate damages.
The Supreme Court did not, however, criticise the Tribunal as the Court of Appeal had done for conducting a trial within a trial at the certification stage, although it did think that cross-examination of experts would be rare.
The significance of the Supreme Court’s judgment should not be underestimated. The light touch approach in the judgement is likely to result in an increase of large scale collective actions being commenced in the UK. Walter Merricks’ case will now be remitted to the Tribunal for reconsideration. The Tribunal will also start to hear all the other CPO applications that have been waiting in the wings, including the Road Haulage Association’s trucks cartel collective proceedings claim on which Backhouse Jones is advising the Road Haulage Association.