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Walter Merricks, a former chief ombudsman of the Financial Ombudsman Service, filed a claim against the credit card provider in September 2016. He argued that Mastercard owed UK consumers a collective £14 billion for charging “unlawfully high” ‘interchange fees’ between 1992 and 2007.
The case centred on so-called interchange fees, the charges levied by credit and debit card companies such as MasterCard on merchants’ banks, which card companies say cover the costs of operating card services, security and innovation. The fees are paid by retailers when processing card transactions. However, retailers pass these fees on to consumers in the prices they charge for goods. So, while you will never be asked to pay an interchange fee yourself when using a debit or credit card, you indirectly do so – even when paying by cash.
Mr Merricks says UK consumers, including cash purchasers – and not just Mastercard holders – have lost money as a result. In 2007, the European Commission told Mastercard to reduce the level of its fees.
The next stage in the process was for the Competition Appeal (CAT), a newly empowered court that oversees Britain’s fledgling class action regime, to allow the action to proceed. But it ruled that it would not grant the necessary collective proceedings order for the case to continue to trial, stating that the claim isn’t eligible for inclusion in “collective [class action] proceedings”.
Had it been allowed to proceed, the case would have been the largest and most complex in British legal history and would have tested the limits of the new Consumer Rights Act, which introduced US-style “opt-out” collective class actions for breaches of UK or European Union competition law in 2015.
Mr Merricks says he’s now “actively considering the possibility of an appeal”. He comments: “The granting of the collective proceedings order in this case would have allowed 46 million consumers to recover the losses caused to them by Mastercard’s proven illegal conduct. “The new collective action regime was introduced by the Consumer Rights Act to overcome the difficulty for consumers seeking to recover losses from competition law infringements,” he said. “I am concerned that this new regime, designed to benefit consumers, may never get off the ground.”
“It is, however, unfortunate that the Tribunal considered that it was not satisfied that my experts would be able to get the evidence to show that the illegal fees charged by Mastercard to businesses were then passed on to consumers in the form of higher prices. It is also disappointing that the Tribunal determined that even if I could identify accurately the loss suffered by all 46 million consumers, the fact that I could not precisely calculate the individualised loss for each of those 46 million consumers, means consumers should get nothing at all.”
“I believe these are matters my advisers could have addressed and overcome had the claim been allowed to proceed.”
The number of potential claimants involved in the proposed action was so large because the law allows individuals to be automatically included in this type of litigation unless they opt out.
A spokesperson for Mastercard says: “We welcome the Competition Appeal Tribunal’s judgment refusing certification for the proposed collective action. As set out in Mastercard’s arguments to date, we believe that the claims were completely unsuitable to be brought under the collective actions regime. The Tribunal sided with this position.”