CAT rejects £14bn credit card fees claim against Mastercard
A proposed £14bn class action against credit card giant Mastercard has been turned down by the Competition Appeal Tribunal.
The claim, brought by former financial ombudsman Walter Merricks and lodged on behalf of around 46m consumers, alleged that fees charged to businesses by Mastercard effectively resulted in consumers paying higher prices over a 16-year period, beaching EU competition law.
It followed a decision of the European Commission in December 2007 finding that, between 1992 and 2007, Mastercard had infringed what is now article 101 of the Treaty on the Functioning of the European Union by in effect setting a minimum price which merchants had to pay to their acquiring bank for accepting payment cards in the European Economic Area. Mastercard’s appeal to the EU Court of Justice was finally dismissed in September 2014.
Mr Merrick's claim alleged that the UK minimum fee was directly influenced by the EEA minimum fee, and that consumers suffered loss as a result of paying prices to businesses that accepted MasterCard cards that were higher than they would otherwise have been had Mastercard not committed the infringement of article 101 established by the EC Decision. The class on behalf of whom Mr Merricks attempted to claim was defined as comprising individuals who between 22 May 1992 and 21 June 2008 purchased goods and/or services from businesses selling in the UK that accepted Mastercard cards, at a time at which those individuals were both (1) resident in the UK for a continuous period of at least three months, and (2) aged 16 years or over.
Dismissing the application, the tribunal found that even if loss had been suffered and could be estimated across the whole class, there was no way of ensuring that an individual would receive an amount compensating for any loss suffered, through difficulties in assessing the extent to which each business passed on the charges through higher prices, and the percentage impact on prices, as well as the amount spent by the claimant class at each business.
"The applicant seeks to address the problem... by submitting that the tribunal can arrive at an aggregate award of damages, which would then be distributed to the class members", the tribunal said in its judgment. "We accept that in theory this may be a permissible approach. But before adopting this approach, it is necessary to consider whether in practice the applicant has put forward (1) a sustainable methodology which can be applied in practice to calculate a sum which reflects an aggregate of individual claims for damages, and (2) a reasonable and practicable means for estimating the individual loss which can be used as the basis for distribution."
After reviewing expert submissions, the tribunal concluded: "Making every allowance for the need to estimate, extrapolate and adopt reasonable assumptions, to apply that method across virtually the entire UK retail sector over a period of 16 years is a hugely complex exercise requiring access to a wide range of data... applying the Microsoft test..., we are unpersuaded on the material before us that there is sufficient data available for this methodology to be applied on a sufficiently sound basis. It follows that we are not satisfied, and indeed very much doubt, that the claims are suitable for an aggregate award of damages".
Welcoming the decision, Mastercard said in a statement: "We believe that the claims were completely unsuitable to be brought under the collective actions regime. The tribunal sided with this position.
"We firmly believe that consumers derive real value from our network through the benefits of security, convenience and consumer protection, and we remain committed to investing in our services in order to continue to meet the rapidly evolving needs of all our customers."