Competition Appeals Tribunal made 5 Errors of Law

The Supreme Court delivered its judgment today upon the correct legal requirements for certification of a claim for collective proceedings in competition damages claims.

It was the first collective proceedings case of this kind to reach the Supreme Court.

Upholding the Court of Appeal, which reversed the Competition Appeals Tribunal, (CAT), the Supreme Court found that the CAT made five errors of law: Mastercard Incorporated and others (Appellants) v Walter Hugh Merricks CBE (Respondent) [2020] UKSC 51.

A special form of civil procedure, collective proceedings were designed to provide access to justice and ensure the vindication of private rights where an ordinary individual civil claim would be inadequate for that purpose.  This purpose helped interpret the legal requirements of the certification process.

The appellant’s claim arose out of the European Commission’s decision in December 2007 that Mastercard breached competition law by fixing a default interchange fee as part of its payment card schemes between May 1992 and December 2007.

This, said the appellant, resulted in an overcharge which retailers paid their banks and, crucially, which retailers then passed on to their customers.

Therefore, consumers paid higher prices for goods and services than they otherwise would have done.

Mr Merricks sought to bring collective proceedings as the class representative on behalf of all UK resident adult consumers of goods and services purchased in the UK during the infringement period from retailers accepting Mastercard, unless the consumer opted out.

He sought an award of damages for the whole class, rather than damages for the claim of each class member.

To proceed, he needed the CAT to certify the claim by making a Collective Proceedings Order (CPO) under section 47B of the Competition Act 1988 as amended.

Courts did not deprive individual claimants of a trial merely because of difficult quantification issues provided there was a triable issue that the claimant had suffered more than merely nominal loss.

The fundamental requirement of justice that the court do its best on the available evidence in relation to damages was the ‘broad axe’ principle and it applied to competition cases.

Justice required that damages be quantified in order to vindicate a claimant’s rights and ensure that a defendant paid to reflect the wrong done, especially where anti-competitive conduct may never otherwise be restrained if individual consumers were unable to bring claims.

The CAT should have asked itself whether the claims were suitable to be brought in collective proceedings compared with individual proceedings, and suitable for an award of aggregate damages as compared to individual damages.

The five errors of law that the CAT made were:

• It failed to recognise that in addition to overcharge, the merchant pass-on issue was also a common issue (as the Court of Appeal had found and which was not appealed to the Supreme Court). This should have been a powerful factor in favour of certification (rule 79(2)(a) of the CAT Rules.
• The CAT placed great weight on its decision that the case was not suitable for aggregate damages. This was a relevant factor for certification but not a condition.
• The CAT should have applied a test of relative suitability. If the forensic difficulties  would have been insufficient to deny a trial to an individual claimant, they should not have been sufficient to deny certification for collective proceedings.
• (described by the Supreme Court as the most serious error) The CAT was wrong to consider that difficulties with incomplete data and interpreting the data were a good reason to refuse certification. Civil courts and tribunals frequently faced problems with quantifying loss and the CAT owed a duty to the class to carry out the task in a case of proven breach of statutory duty coupled with a realistically arguable case that some loss was suffered.
• The CAT was wrong to require Mr Merricks’ proposed method of distributing aggregate damages to take account of the loss suffered by each class member. A central purpose of the power to award aggregate damages in collective e proceedings was to avoid the need for individual assessment of loss and the Act expressly modified the ordinary requirement for the separate assessment of each claimant’s loss.