2015 saw the enactment of the Consumer Rights Act (the "Act"), a piece of legislation which, in 142 pages, replaced the Sale of Goods Act 1979, Unfair Terms in Consumer Contracts Regulations 1999 and the Supply of Goods and Services Act 1982, as well as amending other existing legislation, with the aim of simplifying and strengthening consumer rights. Of particular interest to financial lines insurers, however, is Schedule 8: Private Actions in Competition Law, which introduced changes to the Competition Act 1998 ("CA98").

While the introduction of the Act has not resulted in a deluge of claims against financial institutions, those that have been brought are potentially significant. We focus on two major cases: Walter Hugh Merricks CBE v MasterCard Incorporated and Others (1266/7/7/16) and Michael O'Higgins FX Class Representative Limited v Barclays Bank PLC and Others (1329/7/7/19).

Collective proceedings regime

The amendments brought in by the Act saw, amongst other things, the introduction of an "opt-out" collective redress procedure for competition law claims before the Competition Appeal Tribunal (the "CAT").

Once a class representative has filed the claim on behalf of the class "raising the same, similar or related issues of fact or law", the CAT will consider whether the claim is suitable to be dealt with on a collective basis, taking into account the cost, size and nature of the class. The CAT will have significant control over the scope and focus of the collective proceedings, including who should be included. It will also be for the CAT to decide whether the collective proceedings should be on an opt-in or an opt-out basis.

The availability of the opt-out regime is in contrast to the general position with other types of collective proceedings available in the Courts of England and Wales, such as group litigation orders, which operate on an opt-in basis.

Merricks v MasterCard

In September 2016, the former Financial Ombudsman, Walter Merricks, sought to bring a GBP 14bn class action on behalf of 46 million customers before the CAT. This was prompted by MasterCard having been found by the EU Commission to have acted in breach of competition law by setting multilateral interchange fees which were charged between banks for transactions involving the use of a 'MasterCard' branded card. Through the transactional structure in place, these fees, in varying degrees and over a number of years, were ultimately "passed on" to the consumer (i.e. the customers of merchants that accept MasterCard).

Mr Merricks therefore brought collective proceedings on an opt-out basis, seeking an aggregate award of damages for all individuals who, between 22 May 1992 and 21 June 2008, purchased goods or services from businesses that accepted MasterCard.

Merricks v MasterCard has had quite a tumultuous time before the CAT to date. First, Mr Merricks had to convince the CAT that his case was suitable for collective proceedings in order to obtain a Collective Proceedings Order ("CPO"). The CAT was not persuaded for two reasons: (1) a lack of data to determine the level of "pass-on" to consumers; and (2) an absence of plausible means of calculating the individual loss suffered by claimants. The CAT also refused Mr. Merricks permission to appeal their decision to refuse the CPO on the basis that the legislation provided no route to appeal. Mr. Merricks therefore took his fight to the Court of Appeal.

Mr. Merricks had an initial victory when the Court of Appeal agreed with him that it does have jurisdiction to hear an appeal in relation to a CPO determination (at least in respect of an aggregate damages claim), rather than requiring Judicial Review.

When the substantive appeal came before the Court of Appeal in February 2019, Mr. Merricks was again victorious. The Court of Appeal considered that the CAT had erred in law in its approach and had "demanded too much of the proposed representative at the certification stage". The Court of Appeal considered that the CAT had exposed the application for certification to too vigorous a process whereas, in the Court of Appeal's view, "the proposed representative should not... be required to demonstrate more than that he has a real prospect of success".

As such, the CAT's order refusing certification was set aside and the application was remitted to the CAT for re-hearing. MasterCard has, however, appealed the decision to the Supreme Court.

O'Higgins v Barclays et al

A couple of months after the Court of Appeal's ruling in MasterCard, the CAT was presented with a new application for an opt-out CPO, this time from Michael O'Higgins, former chairman of The Pensions Regulator.

Mr O'Higgins, with legal support from the UK outpost of the US plaintiff firm, Scott + Scott, and financial backing from Therium Capital, is pursuing a number of banks, alleging that they unlawfully manipulated the foreign exchange market between 2007 and 2013 in violation of competition laws.

In a similar vein to MasterCard, Mr O'Higgins' claim stems from a May 2019 European Commission ruling in which the banks were found guilty of anti-competitive behaviour for their roles in foreign exchange trading cartels and were handed fines in excess of EUR 1bn. Precise quantum has not yet been specified but the claim appears to seek hundreds of millions of pounds for those that have been affected by the cartels' manipulation, including pension funds, asset managers, hedge funds and corporates.

Scott + Scott also spearheaded a class action in the US against 15 banks for their role in foreign exchange manipulation. That action was settled last year, resulting in over USD 2.3bn in settlements.

It will be interesting to see how Mr O'Higgins' application for a CPO fares before the CAT following the Court of Appeal's recent guidance in MasterCard and its comments that the CAT had demanded too much at the certification stage.

What next?

As noted earlier, Merricks v MasterCard will be heading to the Supreme Court before the end of the year. It is hoped that the Supreme Court will bring some much-needed clarity to the legal test for the certification of claims as eligible for inclusion in collective proceedings and resolve the correct approach to questions regarding the distribution of an aggregate award when a party is applying for a CPO.

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