This is a live blog of the appeal brought by Mastercard concerning class certification under the UK’s collective action regime introduced by the Consumer Rights Act 2015. Today’s live blog team comprises Devina Shah, Jess Maddox, Imtiyaz Chowdhury, Temi Orekunrin, Andrew Starling, Will Anderson and a round-up of the day’s hearing from Dan Tench, Kenny Henderson and Jess Foley, all from CMS.

1752: The first day of the MasterCard v Merricks appeal has now concluded.

Lord Kerr opened the (virtual) proceedings at 10am.  Mr Mark Hoskins QC appeared for MasterCard. He opened his submissions by reminding the Court that the core question in this appeal is whether the Competition Appeals Tribunal (“CAT”) committed an error of law in refusing to grant Mr Merricks a collective proceedings order (“CPO”).  He submitted that the burden of establishing that the criteria for a CPO have been met (as set out in section 47B of the Competition Act 1998 and Rule 79 of the CAT Rules) falls on Mr Merricks, as the applicant.  Mr Hoskins QC observed that although the purpose of the collective proceedings regime, which was introduced by the Consumer Rights Act 2015, was to facilitate collective claims, it was not intended that all claims should pass through.  They must satisfy the criteria for “eligibility”.  The CAT is an important gateway for collective claims and, in Mr Hoskin QC’s words, it must be considered “Lord of this realm”, rather than the appeal courts.

In Mr Hoskins QC’s submissions on the requirements to be satisfied before a claim can be certified as “eligible”, he discussed the requirement (in Rule 79(1)(c) of the CAT Rules) that the claim be “suitable” for collective proceedings.  The Tribunal shall (under Rule 79(2)(f)) take into account “all matters it thinks fit”, including whether claims are suitable for an aggregate award of damages.  Expanding on this submission, Mr Hoskins QC noted that it was not in dispute that the multilateral interchange fee that was the subject of the European Commission’s 2007 infringement decision was passed on to merchants (retailers) in full.  However, the crucial issue was the extent to which this was then passed on to the consumers.  Mr Hoskins QC drew the Justices’ attention to expert evidence that there were different levels of pass-on across different sectors of the economy.  He also emphasised that rates of pass-on vary geographically and over time, concluding that the experts in this case are themselves hesitant as to whether the complex task of calculating the pass-on rate is achievable in this case.

As regards the methodology for calculating damages, Mr Hoskins QC emphasised that the methodology must be practical and workable in light of the facts of the case.  He recalled the CAT’s comments in this case that an application for a CPO should not be a “mini-trial” of the issues, but that the applicant must do more than simply show he or she has an arguable case.  He noted that the Court of Appeal subsequently referred to the CAT as having required the applicant to “establish more than a reasonably arguable case” – akin to the test for a strike out. Mr Hoskins QC submitted that this was not the correct test for certification. The CAT should instead have regard to the criteria in the legislation, including showing that there is sufficient data for an aggregate award of damages to be calculated.  Mr Hoskins QC submitted that the applicant must satisfy the CAT that the evidence is likely to be available in relation to the damages to be awarded, and that that burden was not discharged by Mr Merricks in this case.  He pointed to some of the practical difficulties in obtaining such evidence in this case.

Mr Hoskins QC resumed his submissions in the afternoon, recalling the case of Pro-Sys Consultants Ltd v Microsoft Corp. [2013] SCC 57] – a Canadian Supreme Court case to which the lower courts had referred in relation to the identification of common issues in claims, which allow them to be determined on a collective basis. He submitted that the interpretation of the English Competition Act 1998 and the CAT Rules is a matter of English law and should not be affected by developments of Canadian law.

Mr Hoskins QC also considered the issue of how Mr Merricks proposed to distribute any aggregate award of damages to class members.  The Court of Appeal held that distribution was a matter for the trial judge and that it was premature and wrong for the CAT to have refused certification by reference to the proposed method of distribution. Mr Hoskins QC submitted that, on the contrary, the CAT was entitled to consider distribution at the certification stage as, pursuant to the CAT Rules, it is entitled to consider “all matters it thinks fit” in determining whether claims are suitable to be brought collectively.  Mr Hoskins further noted that the crucial question is whether the legislation required distribution to be compensatory, and that the CAT was wrong to find that distribution must be compensatory in all circumstances.

At 3pm, Mr Harris QC opened his submissions for Mr Merricks.  He began by addressing the issue of aggregate damages, submitting that the applicant for a CPO does not need to show at the certification stage that all the loss had been passed on to all members of the class for the duration of the claim period.  The key issue is instead establishing loss that is common to the class. Mr Harris QC submitted that Mr Merricks relies on the Canadian case law in considering what is the correct test in this regard.  The Canadian case requires the methodology to “offer a realistic prospect of establishing loss on a class-wide basis”.  Mr Harris QC observed that in light of the size of the class in this case, it is necessary for the claims to proceed collectively in order for justice to be done.  He emphasised the need for a purposive approach and a generous approach to certification, on the basis that the claim can be amended later in the proceedings if needed; certification is not the time to question the merits.

The hearing concluded for the day at 4pm and Mr Harris QC will continue his submissions for Mr Merricks tomorrow. Join us tomorrow from 10am as we live blog the second and final day of MasterCard v Merricks.

1558: Mr Harris QC suggests this is an appropriate place to finish for the day and the Justices agree.

1554: Citing the Canadian Supreme Court case of Godfrey, Mr Harris QC says the court referred there to Microsoft. In the majority judgment the court made reference to the test. Lord Leggatt says he does not think this is a question of establishing liability in relation to commonality. Mr Harris QC says that he does not agree with that. He refers to the certification stage in the judgment. At the certification stage, he says, you ask whether or not certification will significantly advance the litigation. Is it sensible, he says, to proceed in this form or some other form. Answer, Mr Harris QC says, it will if you have a common issue on aggregate damages. He says the reason is that a common issues trial has either the ability to progress the litigation or end the litigation. Lord Leggatt says that shows his point exactly. Mr Harris QC disagrees and says that this can be dealt with in more detail tomorrow.

1551: Mr Harris QC notes points about form. Should this be 42 million individual claims he asks. He refers to commonality. At certification he says the question is, is it sensible to proceed in the form of a group due to commonality?

1548: Mr Harris QC says that what the Tribunal strayed into is an assessment of the probative value of the evidence put forward at this stage. This is not appropriate for this stage. If introduced at summary judgment or strike out, the test would be different.

1547: Mr Harris QC notes that later in the proceedings you can amend or create other classes and trim down. This can be done after certification. Certification is not the time for questioning the merits.

1543: Lord Sales cites the CAT and Rule 4 of justness and proportionality. He asks if it is appropriate to proceed or does the claim become too great? Mr Harris QC says that after closure of pleadings and disclosure you could carve out where the dissonance is too great. He says the approach should be purposive and should be a generous approach at certification.

1540: Mr Harris QC notes that Mr Merricks’ claim shares the same points from the cited Canadian judgment. He also notes the Canadian judgment comment of class actions discouraging conduct from offending companies in the future.

1538: Mr Harris QC notes again the points of access to justice, avoiding duplication and making available cases which otherwise couldn’t proceed. He now cites Canadian case law on these points.

1535: Mr Harris QC says that the expert says the methodology will work and requires data yet to be obtained. Mr Harris QC says he is not pretending that there has been an exhaustive survey of every potential source of data for every year because everyone was applying the Microsoft test, which does not require that.

1533: Lord Sales questions whether it is data on pass-through which was being referred to. Mr Harris QC acknowledges that point and says the expert was confident that his methodology on the data available could be used appropriately.

1528: Mr Harris QC refers to the VAT point and says this was exactly the sort of material referred to by Mastercard’s experts. He says they agreed with Mr Merrick’s expert that VAT is a common tax passed on. He says there is a convergence of theoretical approach and that the tribunal agreed that there was a sound methodology. He also says that, according to Mr Merrick’s expert, more data becomes apparent the more the proceedings progress and the data is delved into. He notes that the case is not yet at that stage.

1525: Mr Harris QC says that Mastercard has not drawn to the court’s attention the Sainsbury’s judgment, which says that a substantial amount would have been passed on. He says it would not be fair to judge the Claimant in this case when there is data not in its possession.

1520: Lord Sales asks if it would not be the end of the road as Mr Harris QC has said as the class could proceed in the categories in which it meets the CAT standards for data for a claim. Mr Harris QC says the proper time to assess that is after closure of pleadings and there has been disclosure. Mr Harris QC refers to Mastercard’s admissions in relation to the Sainsbury’s case, that there will have been pass on at the high end of the scale according to its expert. Mr Harris QC notes that it is this data which is in the hands of Mastercard, but he does not have.

1520: Mr Harris QC notes the size of the class and says that if the claim does not proceed then there will be no claims at all. There are no individual claims issued. The need, he says, is to have collective action to allow access to justice.

1517: Mr Harris QC now turns to the purpose of the regime – to the change of the regime to allow class actions.

1515: Mr Harris QC agrees. He says it is about what is the test the tribunal is applying. The test was the same as in Microsoft and so we must address our minds to what is that test. Some evidence, rather than none, and pass on of some degree, and everything else is considered after the closure of pleadings and disclosure.

1514: Lord Leggatt asks whether the important question is what is the correct test.

1510: Mr Harris QC says he will address this in part in the morning. In what he calls a thumbnail answer, Mr Harris QC says it seems to be accepted that there is data at the indirect purchaser level. He also notes the matter of the amount of data required for all class members is not a matter for this stage of the case. Mr Harris QC cites the Microsoft test in this regard and that the Court of Appeal agreed.

1508: Lord Sales says he would like some guidance in relation to the data sets as retail market may be different to the sectors identified by the expert for Mr Merricks.

1504: Mr Harris QC says that is not a question for this stage of the claim – pre-disclosure and pre-pleadings. The test at this stage is not a threshold test without teeth. It has been seen to knock out several cases in the Canadian Court.

1502: Lord Sales asks if the methodology in relation to evidence is appropriate. He asks if it is right for a claim to proceed at this stage in this way.

1500: Mr Harris QC says that the key is common loss and relies upon the reasoning of the Canadian case law.

1455: Mr Harris QC begins his submissions on ground 1. Mr Harris QC states that in an aggregate damages case some evidence means “not no evidence“. That evidence has to go to there being some pass on of some loss. It does not mean that at the certification stage one has to show that all the loss has been passed on for the duration of the claim and to all members of that class.

1454: Mr Hoskins QC concludes his submissions.

1451: Lord Kerr questions how Mr Hoskins QC contends the Applicant could have overcome that test. Mr Hoskins QC states that the Applicant had to find a methodology that bore some resemblance to the actual loss.  However, it is for the Applicant not the Defendant to do so.

1447: Mr Hoskins QC states the Court of Appeal was wrong to hold that the Tribunal could not consider distribution at the certification as, pursuant to the Rules, the Tribunal was entitled to consider “all matters it thinks fit.” Further there is no legal bar to it doing so. Mr Hoskins QC contends that, for such a claim, it was entirely reasonable for the Tribunal to take distribution into account.

1442: Lord Sales asks for clarification regarding whether the issue of damages falls part of the suitability test.  Mr Hoskins QC states that it does.

1437: Lord Briggs questions whether there may be cases where equality is equity and that equality of distribution is fair.  Mr Hoskins QC acknowledges this and states that the Court of Appeal overturned the Tribunal’s decision on the very narrow point that damages must be compensatory.  Mr Hoskins QC contends that this was a misinterpretation of the Tribunal’s decision.

1433: Mr Hoskins QC summarises Mastercard’s position by stating that the Court of Appeal was wrong to find that the Tribunal found that in all circumstances distribution of damages should be compensatory. In the alternative, the Tribunal was right to do so.

1429: Mr Hoskins QC contends that the crucial question is whether there was a requirement arising from the legislation that distribution must be compensatory.

1424: Lord Leggatt states that Mr Hoskins QC’s argument appears “hopeless” on this issue.  Mr Hoskins QC states that the Tribunal considered that the damages be compensatory and that it was entitled to do so.

1417: Mr Hoskins QC states that the Tribunal agreed with the Applicant’s experts that the a per capita method could not make distribution compensatory.  Mr Hoskins QC contends that the Applicant has now changed its position as regards distribution.

1410: Mr Hoskins QC states that the Applicant acknowledged before the Tribunal the need to make the allocation of damages as compensatory as possible – “We all sing with one voice in this issue.”  The Applicant also acknowledged that distribution was an issue that could be considered at the certification stage and that various methods of distribution had been considered.  Mr Harris QC stated before the Tribunal that only a per capita distribution method could be appropriate and practicable.

1407: Mr Hoskins QC states that there is very little guidance regarding how the Tribunal should consider distribution.  Mr Hoskins begins running through how the arguments regarding damages distribution were made to the Tribunal.

1405: Mr Hoskins QC now moves onto issue 2 – the manner in which the Applicant proposed to distribute the damages to the individuals of the legal class.

1401: Mr Hoskins QC resumes his submissions, referring to the Applicant’s case relying heavily on Canadian law. The interpretation of the Act and procedural rules is a matter of English law.  The interpretation of the Act cannot change every time Canadian law changes.  Lord Kerr agrees.

1400: Lord Kerr welcomes the parties back following the lunch break.

1259: The Court breaks for lunch.

1259: Mr Hoskins QC notes the time and pauses submissions.

1258: Referring to the Court of Appeal judgment, Mr Hoskins QC states that the Court of Appeal notes in its judgment that the Tribunal ignored the fact that a CPO is continuing and can be revoked or varied at any time. Mastercard submits that the statutory conditions are a pre-condition and the fact that a CPO can be varied does not mean that pre-conditions do not have to be met.

1256: The Tribunal questioned the experts for its own understanding and so it was satisfied that the claims could be brought by a CPO. The questions gave the opportunity for experts to reason their arguments and it was found that some arguments were not sustainable or not maintained. Mastercard therefore submits that there was no error of law.

1253: Mr Hoskins QC continues- the Court of Appeal states that there was a mini trial in relation to questioning the evidence from experts and the Tribunal gave little weight to the fact that it stated that there was pass on of charges to Customers. Mastercard submits that there was no error of law in this regard. The questions to the experts were posed by the Tribunal and not Mastercard. There was no weighing of competing expert evidence as Mastercard had no evidence of its own.

1251: Mr Hoskins QC states that if an Applicant fails to meet  the certification rules in an application, the application does not change to merits hearing.

1248: He further continued that the  Tribunal can only make a CPO is they are satisfied that the criteria has been met not the merits. The methodology is plausible and whether there is an availability of data. The Applicant failed to satisfy the Tribunal that the data for aggregate damages would be available, this is a test noted by the Court of Appeal as required for a CPO.

1242: The submissions continue by Mr Hoskins QC  pointing out that the Tribunal stated that the Applicant for the CPO did not address his mind to the evidence required for an aggregate award of damages. This is different from the assertion that all evidence must be provided which is what the Court of Appeal appeared to imply. The Applicant must identify points of information and show that it will be practical to supply this information. Given that the Applicant failed to do so, there was no error of law as stated by the Court of Appeal.

1240: Mr Hoskins QC  further submits that the Court of Appeal applied the more than a reasonable arguable case test which is not the correct test for certification for a CPO under the legislative framework.

1238: Mr Hoskins QC responds by stating that this is not the argument that was put forward at any point either by the Applicant for the CPO or indeed by the Court of Appeal.

1237: The Court asks whether it can be implied that there was a balancing of commonality and suitability that led to the conclusion of the Court of Appeal?

1235: Mr Hoskins QC refers to the Court of Appeal judgment. The Court of Appeal states that there was a misdirection of law in relation to the evidence. It addresses the commonality, the Court of Appeal disagrees with the findings of the CAT on this point. However, the Tribunal did not refuse the CPO due to commonality but due to suitability.

1230: Mr Hoskins QC states that it is for the Applicant to show that there is sufficient data for an aggregate award of damages. The Applicant failed to do so. “I had noted that this is an appeal on a point of law but I am looking at the evidence in this instance. The availability of evidence will be difficult for the reasons that I have outlined.”

1227: Lord Thomas agrees with this question, asking if it is the case that it must be an all or nothing approach in relation or the pass on data for a CPO to be granted.

1226: Lord Briggs notes that the Tribunal appears to state that the claim is not suitable for  a CPO because the evidence brought by the Applicant was incomplete and difficult to interpret. Lord Briggs goes on to note that is generally the case for most claim. Evidence becomes clearer as the claim goes on.

1223: Mr Hoskins QC states that he relies on the criteria stated in the legislation. In the alternative, Mr Hoskins QC submits that even if the test was a arguable case, the Applicant still failed to meet that test.

1221: Lord Thomas requests that Mr Hoskins QC kindly go back to address the necessary test that the Court will have to consider to establish a CPO –  having submitted that it is not an arguable case.

1220: Mr Hoskins QC responds that subject to the limitation period, an Applicant can re-apply for a CPO.

1218: Lord Kerr asks would it be possible to renew the application if it is revealed that there is ample evidence available on pass on value.

1213: Mr Hoskins QC further submitted that the Tribunal considered whether the information on the value of pass on costs was already publicly available as published data. The RBB report that the Applicant sought to rely on revealed that such information is scarce. The Tribunal concluded that no real attempt was made to establish what was actually available. The only data available is simply petrol and supermarkets which is insufficient.

1208: Further, Mr Hoskins QC, held that the prices will be in the possession of the Merchants and not Mastercard and therefore disclosure will not reveal this information. Third party disclosure will be impractical due to the scope of what will be required for a meaningful estimate. This is in view of the fact that it is pass on for all Merchants required. Such disclosure is likely to be resisted by third parties on the point of commercial sensitivity. The applicant will also have to pay the third party costs of complying with the orders for disclosure which will further make it impractical.

1204: Mr Hoskins QC continued to examine the Tribunal’s findings by noting that it was held that there is a requirement for enough information from disclosure from third parties, retailers and petrol companies to come to a conclusion on damages. The actions by retailers covered different time periods from what was sought to be covered by the CPO. There was therefore “no off the peg” source of pass on information in relation to damages.

1202: Mr Hoskins QC notes that the Tribunal considered the weighted average approach. An application for a CPO has to satisfy the Tribunal that the evidence is likely to be available in relation to the damages to be awarded.

1159: Mr Hoskins QC submits that pass on was not a common issue but the Tribunal did not hold that this lack of commonality was sufficient reason that the case was not suitable for a CPO.

1154: Lord Kerr queries how one addresses the question of whether the particular case is suitable for an award of aggregate damages if that is something beyond merely showing an arguable case. Mr Hoskins QC responds that the Competition Appeal Tribunal did not adopt a greater than arguable case test. It was the Court of Appeal which introduced a “reasonable prospect” test.

1148: Mr Hoskins QC notes that, in making a CPO application, the proposed methodology for calculating damages must be practical and workable given the facts of the case. In order for this to happen, there must be sufficient evidence to apply the methodology. This means sufficient evidence that the claims submitted are suitable for an award of aggregate damages, in accordance with The Competition Appeal Tribunal Rules 2015, r 79(2), and the question of whether that threshold has been met is a matter for the Competition Appeal Tribunal’s judgement.

1144: Lord Kerr queries how the test is to be applied as to showing that there is an arguable case.

1141: Mr Hoskins QC refers to the Competition Appeal Tribunal’s judgment on the application for the CPO, and notes the tribunal’s comments that an application for a CPO is not a mini-trial and the applicant does not have to establish a case as they would have to at trial, but must show an arguable case.

1139: Lord Kerr welcomes the parties back following the break.

1129: Break

1127: Mr Hoskins QC states that the Competition Appeal Tribunal only needs to consider the evidence put before it by the applicant, and the onus is on the applicant.

1125: Mr Hoskins QC states that the experts mention in their report that the evidence that they will rely on will be for the petrol and supermarket sectors.

1120: Mr Hoskins QC clarifies that the Competition Appeal Tribunal, on application, was simply evaluating whether the methodology proposed by the experts in calculating the damages using the significant number of retailers is practical.

1118: Mr Hoskins QC refers to the significant number of retailers in this case which are to be used for the methodology in calculating the damages, and submits that it is not practical.

1114: Mr Hoskins QC refers to an example of a 2.5% increase in VAT being passed on by UK businesses to consumers. Lord Sales interjects that he is unsure of the point being made, as if there is an increase in the MSCs caused by the increase in MIFs, businesses will pass it on to consumers to maximise their profits.

1108: Mr Hoskins QC refers to short quotes from competition authorities and regulators mentioned in the experts’ report. He notes that while the quotes make general comments as to the likelihood that the MIFs will be passed on to consumers by retailers, they do not refer to the level of the “pass on”.

1058: Mr Hoskins QC now turns to the evidence that would allow the methodology to be operated.

1056: Lord Kerr points out the experts were already reaching a conclusion in the report, before all evidence was heard.

1054: Lord Briggs questions this approach further. Mr Hoskins QC points out he is highlighting the experts’ reports, and this will be discussed further later.

1052: Mr Hoskins QC points out the experts say the approach to calculation depends on availability of evidence. Lord Kerr questions whether this is unusual, pointing out the early stage of the evidence, it does not mean that it is not a viable claim.

1050: The experts themselves are hesitant as to whether this complex task of calculating the pass on rate would be achievable, Mr Hoskins QC points out.

1048: Mr Hoskins QC talks through the various sectors discussed in the report. He talks through the various methodology used in the report with the Justices.

1047: Mr Hoskins QC point out the experts accept there will be significant variation.

1045: Further discussion between Lord Briggs and Mr Hoskins QC as to the figures that have been used as a comparison, Mr Hoskins QC confirms an average was taken.

1043: Mr Hoskins QC goes on to highlight how rates of pass on also vary geographically and over time. He emphasises the difficulty in assessing the loss over the period of time.

1042: The court interjects to question whether the discussion is taking place in the “real world” or a “counter-factual world“. Mr Hoskins QC confirms the figures are real-world figures.

1040: Mr Hoskins QC discusses how the experts point out the different levels of the rate of pass on between the different sectors.

1038: Mr Hoskins QC points out the crucial part is the extent that this was passed on to the consumers.

1035: Mr Hoskins QC takes the Justices to the expert report, which discusses the methodology for assessing damages, summarising the expert opinion that the MIF was passed on to the merchants in full. This is not in dispute.

1034: Mr Hoskins QC turns to first issue in the appeal: the error of law in determining the claim was not suitable for an aggregate award of damages.

1032: Lord Kerr asks Mr Hoskins QC to confirm there is a limitation issue. Mr Hoskins QC confirms this is a live issue.

1031: He moves on to discuss the scale of the claim, referring to the definition and size of the class.

1030: He moves on to discuss how the consumers suffered loss as a result of the higher retail prices.

1025: Mr Hoskins QC provides the Justices with an overview of Mastercard’s payment system, discussing how the European Commission’s decision on the EEA MIF and subsequent breach of TFEU, art 101, which forms the basis on this claim.

1022: Mr Hoskins QC discusses the aggregate damages put forward by the claimant, pointing out the onus is on the applicant to show the criteria is fulfilled. But he points out that this was put together by lawyers and funders on a commercial basis, to make money. When an application is brought which does not meet the criteria, it should be refused.

1015: Mr Hoskins QC points out the purpose of the legislation is to facilitate collective claims, but it was not intended that all claims pass through. The appeals are limited to points of law and therefore the Tribunal is the “Lord of the realm“.

1013: Mr Hoskins QC moves on to discuss the suitability requirement, The Competition Appeal Tribunal Rules 2015, r 79(2), pointing out Tribunal’s wide discretion, to take into account all matters.

1012: Mr Hoskins QC points out the burden falls on the applicant of the CPO. If the applicant fails to discharge this burden, then the Tribunal has no power to grant a CPO.

1008: Mr Hoskins QC now turns to certification, discussing the CPO conditions, namely the requirement for claims to be just and reasonable and in respect of claims which are eligible. This appeal turns on eligibility.

1007: He refers the Justices specifically to s 47A. He moves on to jurisdiction, pointing out parliament has entrusted this to the specialist Competition Appeal Tribunal.

1005: Mr Hoskins QC discusses the legislative proceedings, referring the Justices to The Competition Act 1998, s 47.

1004: Mark Hoskins QC opens. He says the core question in this appeal is whether the Tribunal committed any errors of law when refusing to grant the CPO.

1002: Lord Kerr welcomes the parties.

1001: Lord Kerr discusses the case heard in January, which Lord Sales was involved in and states they decided the rest of the Justices were not to read the judgment ahead of this appeal.

1000: Lord Kerr opens with an apology for the adjusted timetable.

0909: Submissions on behalf of Mr Merricks should get under way around 3pm. Mr Merricks retains three QCs on his legal team; we expect his submissions to be delivered by Paul Harris QC. The consumer lobby, Which?, has intervened in this appeal, lodging a written submission with the court, prepared by their counsel, Tristan Jones.

0904: The bench for the appeal is Lord Kerr, Lord Briggs, Lord Sales, Lord Leggatt and Lord Thomas. We expect the appeal hearing to get under way at 10am, opening with Mastercard’s submissions, from Mark Hoskins QC.

0859:  Good morning from the UKSC Blog team, as the appeal brought by Mastercard concerning class certification under the UK’s collective action regime introduced by the Consumer Rights Act 2015 commences today.  We’ll be live blogging the oral submissions today and tomorrow.

The appeal relates to the collective action filed by Mr Merricks (the UK’s former Chief Financial Ombudsman) against Mastercard before the Competition Appeal Tribunal (CAT). Merricks’ claim, filed in 2016, is the second action to be brought under the UK’s collective action regime introduced in 2015 (the “CPO Regime”).  The CPO Regime is radical because it permits claims to be brought by a representative on behalf of a class on an “opt-out” basis, meaning that the class members are automatically included in the claim and bound by any final ruling or settlement unless they “opt-out”. Opt-out class actions are powerful procedural devices for aggregating large claims particularly where the harm is spread across a large class such that individual losses are low and offer insufficient incentive for potentially harmed parties to pro-actively seek compensation using “opt-in” mechanisms. Thus these devices can lead to very high value claims being brought.

The CPO Regime requires the CAT to consider, among other matters, whether a claim is “suitable” for the CPO Regime and whether it raises sufficiently common issues. This assessment is applied at a “certification hearing”. In the hearing today and tomorrow, the Supreme Court will be considering the relevant standard to be applied at a certification hearing.

Since Mr Merricks filed his claim, further claims have been filed under the CPO Regime including in relation to the European Commission’s infringement decisions in Trucks and in Foreign Exchange. Those claims are being kept in abeyance until the Supreme Court rules in Merricks. Thus, the Supreme Court’s ruling will be important not only to Merricks, but also because it will give guidance on what standards a potential class action must meet in order to proceed under the CPO Regime.

Merricks seeks to represent a class of approximately 46 million UK consumers, seeking to recover losses claimed to total £14 billion, which were incurred as a result of the multilateral interchange fees (MIF) applied to transactions between 1992 and 2007. MIF fees form part of the Merchant Service Charge paid by retailers to their bank (the “Acquiring Bank”) when customers use a debit/credit card issued by their bank (the “Issuing Bank”) to pay for goods/services. Thus, MIF fees are borne, at least initially, by retailers.

Merricks’ claim is positioned as a follow-on damages action based on the European Commission’s 2007 decision which found that the MIFs applied by Mastercard to cross-border transactions in the EEA were unlawful and breached competition law. In fact, Mr Merricks’ claim concerns “UK MIF” that was applied to intra-UK transactions. Merricks contends that the level of UK MIF was directly influenced by the EEA MIF and so losses resulting from the UK MIF were caused by the infringement identified in the Commission’s decision.

The claim seeks an aggregate award of damages, i.e. for losses suffered by the class as a whole. In his application for a collective proceedings order (CPO) under the new s. 47B of the Competition Act 1998, introduced by the Consumers Rights Act 2015, the CAT refused to certify Merricks’ proposed class. The CAT rejected the application on the grounds that (1) there was insufficient data to enable Merricks to quantify aggregate damages to be applied on a sufficiently sound basis; and (2) Mr Merricks’ proposal to distribute damages on a per-capita basis was insufficiently linked to harm felt by class members and so was inconsistent with English principles of compensatory damages.

Merricks appealed the CAT’s decision to the Court of Appeal. Following a hearing in February 2019, by its judgment of April 2019 the Court held that the CAT had “demanded too much” of Merricks at the CPO stage and had wrongly conducted a “mini trial”. The Court referred to Canadian jurisprudence extensively, holding that the appropriate test at the certification stage was whether the proposed methodology for calculating losses can offer a realistic prospect of establishing loss to the class. The CAT had been wrong to conclude that the aggregate award had to be distributed according to what each individual claimant had lost and that the representative’s proposed approach for distribution was not to be assessed at the certification hearing. Mastercard subsequently succeeded in obtaining permission to appeal the Court of Appeal’s decision from the Supreme Court.

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