£14 billion damages claim filed against MasterCard by UK consumers in landmark collective action

£14 billion damages claim filed against MasterCard by UK consumers in landmark collective action

A 14 billion pound damages claim has today been filed against MasterCard for imposing illegal card charges that were ultimately borne by UK consumers.

The claim, the biggest in UK legal history, was filed this morning at the Competition Appeal Tribunal (CAT) in London. It is  the first claim to be filed under the Consumer Rights Act 2015 on behalf of all UK consumers.  The Act enables a collective damages claim to be brought on behalf of a class of people who have suffered loss.

MasterCard was found, following a long-running legal battle with the European Commission that ended in 2014, to have infringed EU law by imposing charges (known as ‘interchange’ fees) on businesses that accept MasterCard debit and credit cards. More than half a million businesses in the UK accepted MasterCard cards, including major supermarkets, airlines and high street stores.

MasterCard had the option to accept that its card fees were set at an unlawfully high level and reach a settlement with the European Commission to lower its fees. It chose not to do that and instead imposed these unlawfully high card fees for nearly 16 years whilst it engaged in a decade-long  legal battle with the Commission. MasterCard lost this battle at every level and showed complete disregard for its cardholders and consumers at large, focusing instead on generating unlawful profits.

Consumers were unaware of the level of these fees or that they were illegal. The fees were a significant cost for retailers that was then passed on through increased prices of goods and services. All UK consumers, including cash purchasers – and not just MasterCard holders – have lost money as a result.

The claim is being brought by Walter Merricks CBE, as the proposed representative of the class of UK consumers that have suffered loss. Mr Merricks has had a long and distinguished career in defending consumer interests and holding large financial firms accountable for their conduct. Mr Merricks is a qualified lawyer and the former Chief Financial Services Ombudsman, a position he held for 10 years. During that time he oversaw complaints and investigations in respect of some of the largest mis-selling cases by financial institutions and ensured consumers received billions of pounds in compensation.

We have today filed over 600 pages of documents with the CAT that sets out our claim against MasterCard. This includes a statement from Mr Merricks explaining why he is bringing the action and how he will manage it on behalf of consumers. There is also a report from independent expert economists and accountants that support the claim; and a detailed plan for managing the claim, including how the proposed class of 46 million consumers will be communicated with  through a claims website,  newspapers, magazines and social media. High profile consumer groups such as Which? and MoneySavingExpert.com have also agreed to follow the progress of the proposed claim and keep consumers updated.

Walter Merricks stated: “MasterCard charged billion of pounds of unlawfully high fees for its sole benefit and to the detriment of consumers. It has already been found to have broken competition law, the basis of which was to protect consumers, and that cannot be disputed. There is no basis upon which MasterCard can contend that its card fees were not unlawful.”

“The filing of this claim is the first step towards consumers obtaining compensation for what MasterCard did. I am confident that the CAT will authorise the claim to go forward, and I look forward to the opportunity to present our case. This is a watershed moment for consumer redress in this country.”

Because MasterCard’s fees have already been found to be illegal by the Commission, this ‘follow-on’ claim need only prove the damage consumers suffered as a result of MasterCard’s anticompetitive behaviour. Based on expert analysis of the evidence, including recently obtained evidence from MasterCard, we believe the total damage caused to UK consumers to be £14 billion.

Walter Merricks has instructed leading litigation law firm Quinn Emanuel on this landmark case. Their team is being led by partners Boris Bronfentrinker and Kate Vernon, along with of counsel Nicola Chesaites. Leading competition silks Paul Harris QC of Monckton Chambers and Marie Demetriou QC of Brick Court Chambers have also been instructed, along with Victoria Wakefield of Brick Court Chambers.

Boris Bronfentrinker,  stated: “Despite criticising this action publicly in July and further insulting consumers by referring to the UK’s new collective action regime as ‘unfortunate’, MasterCard has since turned over evidence (witness statements and expert reports) that allows us, even at this early stage, to robustly value the claim at £14bn.”

“They are now preparing for a tough legal battle which we estimate will go to trial in 2018 unless they are prepared to make UK consumers a fair settlement offer before then.”

He added, ‘‘MasterCard has itself argued before English courts that any unlawful charges were passed on to consumers by retailers when trying to defend itself in cases brought against it by retailers. Despite arguing that consumers bore the cost of its illegal fees, MasterCard has made no efforts to try to compensate consumers through new voluntary compensation mechanisms.  We have taken account of that evidence in the allegations and damages analysis made in our claim. The consumer claim is completely consistent with what MasterCard has been saying about who paid these unlawful fees. It is not clear how MasterCard can now turn around and argue the opposite to prevent our case from succeeding.”

We have invited MasterCard to consider resolving this - out of court - through Alternative Dispute Resolution (ADR) but it has not responded to that offer. Indeed, such is the concern about its ability to defend the proposed claim that it has now switched from its usual legal advisers that are representing it in all the retailer claims and hired one of the most highly regarded ‘Magic Circle’ defence law firms, Freshfields Bruckhaus Deringer, to represent it.

Under the rules laid down in the Consumer Rights Act, all UK consumers who have lost out and are now living in the UK will automatically become part of the group of claimants unless they explicitly opt-out.  This means that, once the claim is filed, no action will be required by individuals as they will automatically be eligible to receive compensation at the conclusion of the claim. Those not currently living in the UK, but who were during the period 1992 to 2008, will have the opportunity to opt-in.

Funds affiliated with Chicago-based Gerchen Keller Capital, LLC, the world’s largest litigation funder, will provide up to £40 million to partner with Mr Merricks and Quinn Emanuel in order to see this action through to the end. Everything is in place to get the best possible result for UK consumers and ensure that MasterCard is made to pay for its unlawful conduct.