MasterCard faces $18.5bn class action in UK for overcharging

In a landmark judgment, the UK Supreme Court allowed a class action of $18.5 billion to proceed against MasterCard, the American financial services company, for allegedly overcharging more than 46 million people in Britain over a 15-year period.

The complicated case, brought after MasterCard lost an appeal against a 2007 European Commission ruling that its fees were anti-competitive, if successful, could entitle adults in Britain to $396 each.

A MasterCard appeal was rejected by the court, setting the scene for the first mass consumer lawsuit brought by Britain under a new legal system and setting a precedent for a string of other, stalled class actions.

“MasterCard has been imposing excessive card transaction charges over a prolonged period in a way it must have known would impose an invisible tax on UK consumers,” said Walter Merricks, a lawyer who is leading the action.

The case will now be sent back to the Competition Appeal Tribunal (CAT), nominated in 2015 to supervise the emerging “opt-out” joint class proceedings of Britain for violations of competition law in the United Kingdom or the European Union.

For the case to proceed to trial, the CAT would reconsider granting the requisite collective proceedings order (CPO), having declined to certify the case in 2017 because of its complexity. A hearing is expected next year.

MasterCard said it would ask the CAT to avert a serious risk of the new collective action regime going down the wrong path with a “fundamentally flawed” case.

The case centrers on so-called interchange fees which credit and debit card companies say they levy on merchants’ banks to cover the costs of card services, security and innovation.
Between 1992 and 2008, Mr. Merricks alleges that these fees were unfair, that they had to be paid by firms that accepted British customers’ Mastercard payments and were passed on by increased shop prices.

Under the opt-out regime, unless they opt out, UK-based members of a defined group are automatically bound into legal action.

Critics say such regimes encourage unnecessary claims. Others argue they can offer an effective route to compensation for those whose claims are individually too small to bear the legal costs of taking on large companies alone. Further, grouping such claims together helps attract necessary funding.