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Collective proceedings orders: certification threshold lowered

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Russell Butland



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25 June 2019

The Court of Appeal has held that, in refusing to certify a collective proceedings order (CPO), the Competition Appeal Tribunal (CAT) had applied too strict a standard of scrutiny. The test to be applied at the certification stage was whether the claim had a real prospect of success. The Court of Appeal also held that the distribution of an aggregate award of damages amongst the class did not need to be effected in accordance with compensatory principles: Merricks v Mastercard Incorporated & ors [2019] EWCA Civ 674.

In December 2007, the EU Commission (EC) published a decision that the default multilateral interchange fees (MIF), set by Mastercard and charged between banks in relation to transactions using a Mastercard, breached EU competition law (the EC Decision). The EC Decision has generated a substantial number of private damages claims by retailers against Mastercard, and the lead claims (by certain supermarket chains) will be heard by the Supreme Court in January 2020. It is accepted in those claims that the MIF was passed on in full by retailers’ banks to the retailers, but the extent to which retailers passed on the MIF to consumers via higher prices of goods and services is disputed. In September 2016, Mr Merricks commenced follow-on collective proceedings against Mastercard claiming aggregate damages on behalf of a class defined to include 46.2 million individuals who had purchased goods or services from UK businesses that accepted Mastercard between 1992 and 2008. He alleged that consumers had paid higher prices during the claim period due to the unlawful MIF being passed onto them and sought aggregate damages of over GBP14billion for the overcharge, to be distributed amongst class members on an equal per capita annualised basis.

CPO regime: a reminder

The Consumer Rights Act 2015 amended the Competition Act 1998 (the 1998 Act) to create a new class action regime in the UK, whereby a class representative can commence proceedings for breaches of competition law on behalf of a defined class of claimants.1 However, such claims can proceed only if the CAT first makes a CPO. Under the 1998 Act and the Competition Appeal Tribunal Rules 2015 (the Rules), the CAT may make a CPO only if it is satisfied, inter alia, that the individual claims of the members of the class are eligible for inclusion in collective proceedings. To be eligible the claims must raise “the same, similar or related issues of fact or law” (the commonality requirement) and be “suitable to be brought in collective proceedings”.

CAT refusal to certify Merricks’ application

The CAT interpreted the 1998 Act and the Rules as requiring the class representative “to do more than simply show that he has an arguable case on the pleadings, as if, for example he was facing an application to strike out” and requiring the CAT “to scrutinise an application for a CPO with particular care, to ensure that only appropriate cases go forward”. The CAT relied on Canadian jurisprudence, in particular Pro-Sys Consultants Ltd v Microsoft Corp2 (the UK regime being modelled on Canada’s), for guidance that the expert methodology proposed by the class representative must be “sufficiently credible or plausible to establish some basis in fact for the commonality requirement”, and that “there must be some evidence of the availability of the data to which the methodology is to be applied”.

The CAT accepted that the claim raised some common issues, but refused to make a CPO on two main grounds. First, in relation to the extent to which the MIF was passed on to consumers, although it accepted that the expert methodology proposed was sound, it was not persuaded that there was sufficient data available to determine the level of pass-on so as to be able to determine the amount of aggregate damages, given that the calculation would need to cover the entire UK retail sector over a 16-year period. Secondly, the CAT held that the proposed method of distribution of any aggregate award would bear no relationship to the actual loss of each class member and therefore offended the ordinary principles on which tortious damages are awarded on a compensatory basis. 

Mr Merricks appealed alleging that the CAT had adopted the wrong approach in relation to: (i) the assessment of expert evidence and the strength of the case on pass-on; and (ii) distribution, in particular in directing itself that a method of distribution amongst the members of the class which did not seek to link distribution of an aggregate award of damages to individual loss was impermissible. 

Court of Appeal clarifies the certification test

Threshold for certification is a real prospect of success

The Court of Appeal agreed with the CAT that the Canadian jurisprudence, including Pro-Sys, informed the correct approach to certification under the 1998 Act. However, it concluded that the CAT had misdirected itself as to the test the class representative had to meet, and the appropriate degree of scrutiny the CAT should apply. The standard set out in the Canadian jurisprudence is that the class representative must show “some basis in fact” for each of the certification requirements.

The Court of Appeal held that under the 1998 Act this equated to a requirement at the certification stage for the proposed representative to demonstrate that the claim had a real prospect of success, as it would need to do in resisting an application for strike-out. In this sense, a certification hearing is no different from any other kind of interlocutory assessment of the prospects of success at trial before all the evidence has been filed. The court concluded the CAT had misdirected itself as to the threshold the class representative had to meet, and the appropriate degree of scrutiny it had to apply; in effect it had conducted a mini-trial and had required Mr Merricks to establish more than a real prospect of success. The CAT need be satisfied only that the expert methodology was capable of assessing the level of pass on and calculating an aggregate damages award, “and that there was, or was likely to be, data available to operate that methodology”. The complete data set did not need to be produced, and the CAT did not need to “enter into detailed debate about its probative value” at the certification stage. The CAT had therefore erred in law by applying the wrong test in relation to whether Mr Merricks had demonstrated that the claims were eligible for inclusion in collective proceedings.

Distribution: ordinary compensatory principles inapplicable

The Court of Appeal also held that neither the 1998 Act nor the Rules required aggregate awards to be distributed in accordance with ordinary compensatory principles. The 1998 Act specifically provided for aggregate awards of damages in collective proceedings and did not limit the scope for such awards by reference to common law principles applicable to individual claims. To do so would undermine the rationale behind the new regime of facilitating redress for those affected by competition law infringements but without the resources to pursue individual claims. The Court of Appeal allowed the appeal, and remitted the application for certification to the CAT for a re-hearing.


The collective proceedings regime has been in place for almost four years, but to date no proceedings have achieved certification, raising concerns as to whether the regime was fit for purpose. However the Court of Appeal has now considerably lowered the threshold that CPO applications will need to meet to proceed with collective proceedings, in turn making the defendant’s task more onerous. The Court of Appeal has made clear that the correct test to apply is the “real prospect of success” test, familiar in the English courts in relation to strike-out applications. Beyond Merricks at least two other CPO applications are currently on foot. The Court of Appeal’s judgment increases the probability that Merricks and these other proceedings will be the first to navigate the regime successfully. It is also likely to encourage claimant law firms and litigation funders to identify and pursue further class actions.

The Court of Appeal held that making a CPO would not prevent the CAT subsequently varying or revoking that order, for instance, if it transpired at a later date that sufficient data was not actually available. This may only be of small comfort to defendants, who may have incurred substantial costs defending large and complex proceedings to get to that point.

Finally, Mastercard has applied for permission to appeal to the Supreme Court, and so whether the Court of Appeal’s judgment will be the definitive statement of the certification test remains uncertain. That uncertainty is likely to delay the certification hearings of the other collective proceedings currently before the CAT, and may dampen the encouragement the judgment will otherwise give to claimants.


1. Under s47B of the 1998 Act.
2. [2013] SCC 57.

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication. If you wish to receive this publication, please contact Amy Edwards