Opt-out actions: a class apart

United Kingdom

The Court of Appeal has set aside a 2017 decision of the Competition Appeal Tribunal (CAT) refusing to certify a £14bn mass consumer claim against Mastercard as “collective proceedings” under the Competition Act 1998 (Merricks v Mastercard Incorporated and Anor [2019] EWCA Civ 674).

The court held that the CAT had not adopted the correct test in considering the claimant’s application for a Collective Proceedings Order (CPO) and further rejected the suggestion that any award of aggregated damages would require to be distributed based on the losses suffered by individual claimants. The CAT’s order was therefore set aside and the application for certification remitted to the CAT for a re-hearing.

The judgment marks a significant development in the emerging market of class action litigation in the UK and is the first case to consider the criteria for obtaining a CPO.


The claim, which is backed by litigation funders, was launched by Walter Merricks, a former financial ombudsman, on behalf of 46m UK consumers.

The claim alleges that Mastercard charged excessive credit card fees which affected all UK consumers who purchased goods or services during the relevant period (22 May 1992 to 20 June 2008), regardless of whether those purchases were made by card or cash.

Mr Merricks sought to have the claim certified by the CAT as suitable to proceed as “collective proceedings”, a significant innovation introduced into the Competition Act 1998 by the Consumer Rights Act 2015. Such collective proceedings – which are currently only available in the CAT, and not in the English courts more generally - are commonly referred to as “opt-out” class actions, i.e. claims which are brought on behalf of an entire class of claimants, excepting any individual claimants who choose to opt-out. At the conclusion of the proceedings, if the claim is successful, all members of the class who have not proactively opted-out will have the opportunity to share in any damages awarded. The first step in launching such a claim in the CAT is to apply for a CPO certifying the claim as suitable to proceed as a group claim.

In this case, the claim sought an aggregate award of damages, as permitted by section 47C(2) of the 1998 Act. It was proposed that any damages awarded should be distributed to class members on an equal per capita basis for each year that the individuals were members of the identified class.

Mastercard objected to this approach, arguing that this was inimical to the compensatory nature of damages and would result in individuals receiving sums that would bear no relation to their actual loss. In response, Mr Merricks argued that a “top down” method of calculation was entirely appropriate. He pointed to the express power in section 47C(2) of the 1998 Act to make aggregate awards of damages and argued that it would render that power nugatory if distribution could only be conducted with reference to the actual loss of individual claimants.

The CAT refused the CPO application following a three day hearing at which Mr Merricks’ experts were cross-examined in some detail by Mastercard’s counsel and further questioned by the members of the CAT. In refusing the CPO, the CAT concluded:

  • that the application put forward inadequate data to support the proposed methodology to calculate the level of overcharge that was passed on to consumers; and
  • in relation to damages, that whilst a top-down approach could be taken, it would nonetheless be necessary to consider how that would translate into determination of the individuals’ losses for the purposes of distribution of damages.

Court of Appeal judgment

The Court of Appeal held that the CAT’s approach was wrong. In relation to the first issue, the court concluded that the CAT had demanded too much of Mr Merricks at the certification stage. Whilst the CAT was entitled to satisfy itself that the methodology was credible in the context of a CPO application, in this case the CAT had gone further and carried out a “mini-trial”.

In relation to the second issue, the court rejected the suggestion that any award of damages would require to be distributed based on the losses suffered by individual claimants. The court held that the new procedure had been introduced by Parliament in 2015 with the obvious intention of facilitating a means of redress that could attract litigation funding and had made explicit provision for aggregate awards of damages to be made without reference to individual losses. Had Parliament considered it necessary to limit that new procedure by requiring reference to be had to individuals’ actual losses, the legislation would have said so. Further and in any event, the court was of the view that the question of distribution was a matter for the trial judge and was not a matter that was to be taken into account in the context of a CPO application.

The case will now be remitted to the CAT for certification to be considered again, although Mastercard is understood to be considering appealing the Court of Appeal’s decision to the Supreme Court.


The Court of Appeal’s judgment is a significant boost to the opt out collective proceedings regime, which is still in its infancy. Although intended to facilitate access to justice, the regime has suffered from the fact that to date no CPO has been granted and only two (unsuccessful) CPO applications have been made to the CAT. In light of the CAT’s decision to refuse to grant a CPO in Merricks v Mastercard, some commentators considered that “opt out” class actions for breach of competition law were dead in the water. The Court of Appeal has now significantly recalibrated the threshold for obtaining a CPO and made clear that the bar is not as high as the CAT previously set. It remains to be seen whether the CAT will now change its position or if Mastercard will appeal to the Supreme Court for final judgment on this important issue.

More generally, opt-out class actions of this nature have long been a feature of other jurisdictions, notably the US. The introduction of such procedures in the UK are of considerable interest to litigation funders and consumer rights groups, who will be following the Mastercard case with interest.

At the moment, the procedure is only available in relation to competition cases that are brought before the CAT, for example for damages arising out of abuse of dominant position under the 1998 Act. The English courts do not currently recognise “opt out” class actions. However, “opt-in” group actions are available in certain circumstances, i.e. claims brought by multiple claimants who have proactively “opted-in”.

A high profile example of such a case is the claim raised against Wm Morrisons Supermarket plc by 5,000 of its employees following a data breach by a disgruntled employee. The High Court found Morrisons vicariously liable to pay compensation to the employees included in the claim, and in a decision late last year, the Court of Appeal upheld that decision (although a Supreme Court appeal is pending, Morrisons having been granted permission to appeal).

A comparison of the Mastercard and Morrisons cases starkly illustrates the difference between an opt-in and opt-out process. 100,000 employees were affected by the Morrisons breach; however, only 5% of those affected will recover compensation through that claim process. By contrast, arguably the majority of consumers affected by the alleged Mastercard breach will potentially benefit from Mr Merricks’ claim if it is successful.

So, what is the likely direction of travel for class actions in the UK? It is notable that reform is already actively underway north of the border. Primary legislation has been introduced in Scotland that makes provision for both opt-in and opt-out class actions to be brought before the Scottish courts and the detailed rules to bring these proposals forward are currently awaited. Are we likely to see opt-out procedures becoming more widely available throughout the rest of the UK? There is every reason to think so.

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