The recent £14 billion claim against MasterCard for alleged unlawful anti-competitive conduct is the first major case to have been brought under the Consumer Rights Act 2015 (CRA).
03/10/2016
The CRA permits collective proceedings to be brought in the Competition Appeal Tribunal on an ‘opt-out’ basis for the first time in the UK, introducing a process similar to US class actions.
The claim against MasterCard is led by a consumer representative, Walter Merricks who was formerly the Chief Ombudsman of the Financial Ombudsman Service. It is being brought on behalf of around 46 million British consumers hit with higher prices allegedly passed on to them by British retailers as a result of anti-competitive payment processing fees by MasterCard. If successful, eligible UK consumers who do not opt-out of the proceedings will automatically qualify for compensation.
Group litigation orders
Prior to the introduction of the CRA, UK law provided for a group litigation order (GLO) to be brought against a common defendant on an ‘opt-in’ basis under Part 19.11 of the Civil Procedure Rules (CPR). This meant that claimants would have to specifically opt-in to the litigation prior to a court specified cut-off date.
In contrast, the CRA allows competition claims to be brought on behalf of a described class of claimants with the same, similar or related issues of fact or law, unless they specifically opt-out of the collective action. In the US, the opt-out rate in most class actions is less than 2% of the class.
The claim against MasterCard is the latest development in collective group actions in the UK since Kennedys’ seminar on GLOs in June 2016. We detailed the mechanism for bringing a GLO in the UK under the CPR, with a key criterion being the opt-in requirement. On receiving an application, the court has discretion to order a GLO where claims give rise to “common or related issues” of fact or law.
Class actions of the opt-in variety can be brought in the UK in respect of claims relating to product liability, competition law, pension disputes and financial services, but not environmental law. Whilst there is no minimum number of claims required in order to make an application for a GLO, the CPR provides that there must be “a number of claims”, which might explain why the average number of new GLOs for the last ten years in the UK has been no more than five each year. In contrast, the new avenue for consumer claims to be pursued on an opt-out basis is likely to result in an increase in collective proceedings, as there will be no need to recruit a significant number of participants prior to making the application.
The future
Before implementation of the CRA, there were overlaps and inconsistencies between EU and pre-existing UK legislations.
The CRA was introduced to simplify and reform consumer law in the UK. It is a standalone piece of legislation that does not derive from EU legislation, which means that Brexit does not have a potential impact. The CRA extends to England, Wales, Scotland and Northern Ireland, although some parts apply only to Scotland.
The new provisions in the CRA are a first step towards more accessible collective proceedings in the UK. They will increase the exposure of corporates and financial institutions to collective consumer actions for redress as a result of infringement of competition law. Whilst we can expect to see more consumer claims against corporates, at this stage the recourse to opt-out collective actions remains very narrow and is limited to claims pursued under the CRA.
The MasterCard claim will test the issues surrounding opt-out collective proceedings and pave the way for similar group claims under the CRA in the future.
