What does the latest decision of the CAT in the Mastercard/Visa proceedings mean for class actions?

Last month, the Competition Appeal Tribunal (CAT) declined to grant the collective proceeding applications brought against both Mastercard and Visa. Litigation funders and competition claimant lawyers, in particular, will need to consider this judgment carefully and assess how the challenges in bringing applications for CPOs impact the appetite to fund such claims in the future.

The claims

Mastercard and Visa each set multilateral interchange fees payable where a transaction takes place using a Mastercard or Visa payment card, between the merchant's bank and the cardholder's bank. The claims seek damages for breaches of competition law alleged to arise from the imposition of these fees which the merchants say had the effect of increasing the charges paid by them to their banks to process the customer transactions. 

Background to collective proceeding orders

The Consumer Rights Act 2015 introduced section 17B of the Competition Act 1998 under which collective proceedings may be brought before the CAT by a certified class representative. The representative does not itself have to be a class member and in these proceedings both of the Proposed Class Representatives (PCRs) are special purpose vehicles established to pursue the claims. The CAT may only make a collective proceedings order (CPO) if the PCR meets certain requirements and the claims themselves are eligible for inclusion. Essentially the CAT must consider that the claims raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings.

So why did the CAT refuse to make the CPOs?

The claims fell in to two categories: 

• Opt-out proceedings where a lead claimant fights a claim representing a category but no-one else is required to sign-up. If the lead claimant wins, everybody who meets the criteria of the claim is entitled to compensation.
• Opt-in proceedings where potential claimants need to actively give their permission to take part. If the lead claimant wins, everybody who signed up is entitled to compensation.

The CAT found that there were issues for both categories of claims relating to the identification of the potential class members. The CAT also found that the PCRs had failed to advance an appropriate methodology as required by the case law in order for the proceedings to be tried on a collective basis.

The lack of an appropriate methodology extended to questions of infringement, causation and quantum.

What does this mean for class actions more generally?

In the judgment, the CAT makes specific reference to its role as a gatekeeper and the fact that it needs to satisfy itself that the PCR is likely to be able to bring a claim to fruition so as to fully assert the rights of class members which will then be extinguished by whatever results from the collective proceedings. This was why the lack of an appropriate methodology was of such concern. It shows that the CAT is taking seriously its role of scrutinising the claims given the impact on the potential claims of members of the class.

The CAT however also granted the PCRs eight weeks to notify it whether they intend to present revised applications that seek to address the concerns expressed by the Tribunal. This follows its approach in another case where the CAT was stopped from issuing an outright rejection of the certification application on a first application. So it also demonstrates the potential for flexibility on the part of the CAT when considering these kind of applications.

Whilst the collective proceedings regime was introduced back in 2015, there have been only a limited number of CPOs granted by the tribunal and the procedure is clearly not without its challenges. It does remain fertile ground for litigation funders in the UK, however, bringing the ability to fund large consumer actions against multi-national companies for breaches of competition law. We expect funders and competition claimant lawyers to consider this judgment carefully and assess how the challenges in bringing applications for CPOs impact the appetite to fund such claims.