On 11 December 2020 the Supreme Court handed down a very significant judgment relating to the certification of a £14bn opt-out competition collective action brought by Walter Merricks against Mastercard, in respect of losses alleged to have resulted from the use of anti-competitive multilateral interchange fees.
The Supreme Court largely confirmed the less restrictive approach to certification set out by the Court of Appeal when it overturned the Competition Appeal Tribunal’s (CAT’s) original refusal to grant the Collective Proceedings Order (CPO) sought by Mr. Merricks (see our previous briefing). As a result, the CAT will now need to reconsider Mr. Merricks’ application for certification of the claim against the principles set out by the Supreme Court. Thus, the Supreme Court’s ruling does not amount to any determination of the CPO application nor of the merits of the claim. Instead it provides clear principles against which the CPO application is to be reconsidered by the CAT.
Further to our initial blog post last week, we reflect here on the key takeaways and practical implications of the judgment.
Key takeaways and practical implications
- The Supreme Court determined that the statutory requirement for claims to be “suitable to be brought in collective proceedings” should be interpreted as meaning “suitable in a relative sense” ie more suitable to be brought in collective proceedings, with an aggregate award of damages, than through individual proceedings with individual damages.
- In endorsing this relative approach, the Supreme Court has given clear guidance as to the approach the CAT should take to certification of claims, such as those in Merricks brought on behalf of a large number of consumers who are each alleged to have suffered relatively little loss, where it would simply not be feasible for claims to be brought individually.
- However, it is far from clear what this relative approach to suitability will mean going forward in respect of claims brought on behalf of classes made up primarily of corporate claimants with higher value individual losses, who would be in a better position to bring individual claims. In such circumstances, the relative approach endorsed by the Supreme Court may weigh against the certification of collective proceedings.
- Two further aspects of the Merricks case also make the implications for future CPO applications less clear:
- The claimant class in Merricks is made up entirely of end consumers. Therefore, unlike in many follow-on damages claims, questions as to the extent of pass-on by the claimants do not need to be taken into account in the quantification of damages. Where such questions are a key consideration, the relative approach to assessing suitability could militate against the certification of collective proceedings: consideration of the level of pass-on often demands an evidence-intensive, individualised enquiry, making calculation of an aggregate award which is a reasonable estimate of loss less straightforward.
- The Supreme Court upheld the finding of the Court of Appeal that where an aggregate award of damages is sought (as in Merricks), there is no requirement for the separate assessment of each claimant’s loss. This approach will, however, only apply where an aggregate award is sought (which may not always be the case).
- The judgment also leaves some uncertainty over what process should be followed at the certification hearing itself. The Court of Appeal had criticised the CAT for carrying out a form of “mini-trial” at the certification stage, including cross-examination of the applicant’s experts. The Supreme Court expressly rejected this criticism, taking the view that whilst the questioning or cross-examination of expert witnesses at certification hearings should only be a “rare occurrence”, exceptions to this general rule could be permitted. However, it did not provide any further guidance as to the circumstances in which this may be justified in other cases.
- Finally, the judgment recognises but does not address in any detail the application of a “merits test” in the context of considering the strength of the claims when the CAT is deciding whether to certify collective proceedings on an opt-in or opt-out basis. This was not a question which arose in the Merricks appeal, but may be an important consideration in other cases.
- In terms of the wider impact of the judgment on the UK competition collective actions regime, it remains to be seen whether it will necessarily lead to more class actions being brought. However, the decision will unlock a number of potential claims that have been on hold, by bringing some clarity to how claimants need to formulate their claims and what supporting evidence they will need to bring an application.
For further detailed analysis of the judgment, please see our detailed follow-up briefing here.
We will be discussing the implications of the Merricks judgment for the UK competition collective actions regime in a webinar taking place at 12pm tomorrow (16 December). You can register for the webinar here.