MasterCard: Court of Appeal will hear appeal against refusal of Collective Proceedings Order

In a landmark judgment, the Court of Appeal held that it has jurisdiction to hear an appeal by a proposed class representative against a refusal by the Competition Appeals Tribunal (CAT) to grant a Collective Proceedings Order (CPO). A CPO is currently the only English law procedure for pursuing a collective action on an opt-out basis. In this case, the proposed defendant had argued that the CAT’s refusal could only be challenged by way of judicial review.

Background

When a customer uses a MasterCard credit or debit card to pay a retailer, the customer’s bank pays the retailer’s bank the sale price less an interchange fee, at a level set by MasterCard. Interchange fee arrangements can be agreed bilaterally between two banks, but in practice are usually agreed multilaterally by a decision binding all the banks within the MasterCard payment card scheme. In 2007, the European Commission found that MasterCard’s multilateral interchange fees were anticompetitive, and therefore in breach of EU law, because they effectively created a pricing floor. The Court of Justice of the EU (CJEU) confirmed this decision in 2014.

Based on the CJEU decision, in Merricks v MasterCard Inc & Others [2018] EWCA Civ 2527 a former Financial Ombudsman (Mr Merricks) applied for a CPO to allow him to bring an “opt out” collective action for follow-on damages on behalf of UK residents who had used a MasterCard to make purchases from UK businesses during the period of infringement. The CAT refused the application on the basis that:

• they were not satisfied that there would be sufficient data available to calculate the aggregate amount that should be awarded to the collective claimants by way of damages; and
• there was no way of approximating the loss suffered by each individual claimant so as to distribute the aggregate amount in a principled manner.

The jurisdiction issue

Mr Merricks wished to challenge the CAT’s decision by way of an appeal on the grounds that it contained errors of law. In order to do this, he first had to show that the Court of Appeal had jurisdiction to consider an appeal against a CPO under s.49(1A)(a) Competition Act 1998, which permits appeals “from a decision of the Tribunal as to the award of damages or other sum (other than a decision on costs or expenses).” MasterCard argued that the decision whether or not to make a CPO was not “as to the award of damages” because the refusal of a CPO did not prevent members of the class from pursuing individual claims for damages. If this was correct, then the CAT’s decision could only be challenged by way of judicial review, which would require Mr Merricks to clear the higher hurdle of proving not merely that the CAT was wrong in law, but that it had exceeded its powers, acted irrationally, or acted so unfairly as to amount to an abuse of its powers.

The decision

The Court of Appeal held that it had jurisdiction to hear the appeal. The Competition Act had to be construed in the light of the fact that collective proceedings were introduced in order to address the difficulties of bringing individual claims. A decision to refuse a CPO prevented the proposed class representative from seeking an aggregate award of damages, which was a remedy unique to collective proceedings and therefore distinct from the remedies that class members could seek in individual proceedings. It was therefore “a decision of the Tribunal as to the award of damages” within the meaning of s.49(1A)(a). It was not a purely procedural decision.

The court noted that there was a separate issue as to whether the points raised in Mr Merricks’ grounds of appeal were true points of law as opposed to matters of fact or discretion (which, generally speaking, cannot be appealed.) However, that was an issue to be decided at the hearing of the appeal itself rather than at the jurisdictional stage.

Comment

The CAT’s decision in this case was seen as a significant blow for a collective proceedings regime that was already struggling to get off the ground. This decision by the Court of Appeal will not necessarily change that, since Mr Merricks will still have to convince the court that the CAT made an error of law in holding that the lack of suitable methodologies for determining the amounts of the aggregate award and of payments to individual class members rendered the matter unsuitable for collective proceedings. However, it has established for the first time that decisions of the CAT regarding a CPO are, in principle, appealable.

Further, there are some indications in the judgment that the Court of Appeal may be more sympathetic to Mr Merricks than the CAT on the merits of a CPO. The CAT based its decision largely on its dissatisfaction with a “top-down” methodology in which the aggregate award was calculated first and then divided between class members, rather than beginning with individual losses and aggregating these into an overall award. By contrast, the Court of Appeal’s decision on jurisdiction is based on a recognition that collective proceedings, and in particular the option to make an aggregate award, were introduced in order to avoid the need for the CAT to engage in individual damages calculations. It will be interesting to see whether this carries forward into a different approach to what the proposed class representative must show in order to obtain a CPO.

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