Group actions: a perfect storm brewing?

This article first appeared in New Law Journal, September 2021.

The move towards US-style opt-out group claims becoming the norm in the UK took a huge step forward last month when the Competition Appeal Tribunal (CAT) certified the first application for a collective proceedings order (CPO) on an opt-out basis in Merricks v Mastercard [2021].

While the sheer size of the potential damages—an eye watering £7.2 billion— stole the headlines, the case has many implications for consumers, lawyers, funders and insurers. Indeed, although the case is due to be the largest group action in English history, perhaps of more significance is the cultural shift it signifies in the potential for opt-out group actions to become more widely available in the UK.

With several large group actions waiting in the wings, the floodgates could be about to open.


The CPO regime was introduced under the Consumer Rights Act in 2015; however, it has taken until now for the first CPO to be certified. A CPO is a pre-requisite for an opt-out action seeking damages for a breach of competition law. If granted, it means that action can be taken on behalf of a class of unnamed claimants who are automatically included in the action unless they opt out. This makes the actions potentially larger and more expensive than traditional litigation.

Walter Merricks, former chief ombudsman of the Financial Ombudsman Service, sought to bring a CPO, arguing that Mastercard charged unlawful ‘interchange fees’ to retailers between May 1992 and June 2008 and that these costs were passed onto shoppers with higher prices.

The certification for a CPO was rejected by the CAT but appeals followed and the Supreme Court provided clarification on how certification of a CPO should be approached. The case was remitted back to the CAT.

The judgment of the CAT

Further to the guidance of the Supreme Court, Mastercard did not oppose the certification of the CPO. However, the CAT was still required to consider some important factors.

Mr Merricks tried to significantly widen the class action—from 46.2m consumers to 59.8m—by seeking permission to include deceased people within the class. The CAT refused, stating that, while personal representatives on behalf of the estates of deceased people can bring a claim for loss, a deceased person could not do so and so could not be part of the class.

The CAT refused the claim for compound interest which would have seen the potential value of the claim increase from £7.2 billion to up to £16 billion. This leaves claimant the right to claim simple interest only.

The CAT ruled that Mr Merricks was suitable to act as the class representative and certified the CPO, but subject to an undertaking being provided by the litigation funder to discharge any liability for costs ordered against Mr Merricks. Further, the funders had reserved the right to terminate the litigation funding agreement if it was thought that their return may fall below at least £179 million.

The CAT amended this to ensure any termination on this basis was backed by legal and expert advice.

What does this mean for the future?

The clear winners are going to be funders. There are reportedly 12 applications or CPOs which have been awaiting the certification process outcome in Merricks and which will now proceed through the CAT. There is a lot of money at stake if they are successful.

The consumer is also a winner here. The likely average financial recovery in Merricks is only around £155 per class member. There is now the potential for many more group actions for what would be small-value single claims in the competition arena, which would not otherwise be worth pursuing. This will hopefully be a deterrent against future breaches of competition law but could have a big impact on insurers, who will need to assess their premiums.

One piece of good news for businesses and insurers is that the CAT took its time to consider the claim at the certification stage, such as not allowing the broadening of the claim to deceased people. This illustrates that the court is still keen to exercise control in these cases.

While the CAT’s judgment only applies to private competition law, several factors indicate the potential growth of opt-out group actions more generally in the courts of England and Wales. The certification of a large CPO like Merricks, and the likelihood of other CPOs now being certificated by the CAT, may lead to a cultural shift towards the English courts accepting more US-style large opt-out group actions.

Of relevance here is the case of Lloyd v Google, with the Supreme Court’s judgment expected this autumn. This is a case outside of the CAT, relating to loss of control of personal data by iPhone users. It will decide whether the ‘representative action’ regime may be used more widely in the future to facilitate large opt-out group actions. In making decisions on the direction of group litigation, the courts may also have in mind the drive for collective redress in Europe— an EU Directive now allows consumers to bring group actions for infringements of EU law—and the need therefore for the English courts to remain a popular forum for international litigation.

The granting of a CPO in Merricks is a landmark moment that allows not only the biggest group action this country has ever seen to progress, but also illustrates a cultural shift which may enable more CPOs and US-style group actions in the UK. With the decision in Lloyd v Google awaited, there is an almost a perfect storm of change brewing around group actions in the UK. While this has its benefits for funders and consumers, businesses and insurers will need to keep a close eye on what the future holds.

Read other items in London Market Brief - September 2021

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