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January 30, 2017updated 04 Apr 2017 3:56pm

MasterCard: An open and shut case?

The MasterCard consumer class action is the first major case of its kind in the UK, through which millions of consumers could receive compensation for MasterCard having overcharged retailer interchange fees during a certain period – quite an extended period, as it happens. Anna Milne spoke to an industry solicitor for an insight

By Anna Milne

The MasterCard consumer class action is the first major case of its kind in the UK, through which millions of consumers could receive compensation for MasterCard having overcharged retailer interchange fees during a certain period – quite an extended period, as it happens. Anna Milne spoke to an industry solicitor for an insight

On the back of the EU having successfully hounded MasterCard for excessive cross-border interchange fees, Walter Merricks, a former ombudsman (first in insurance, then in finance) has taken up the case on behalf of millions of consumers who shopped between May 1992 and June 2008.

Consumers need not even have spent on a MasterCard, simply shopped at businesses that accepted MasterCard cards. Consumers must have been resident in the UK for a continuous period of three months, and have been over 16 years of age at the time. Eligible consumers will automatically be opted in.

The class includes 65 million customers at the outermost, although perhaps more in the region of 45 million and the claim is for £14bn, having been reduced from £19bn.

A new departure for legal action

A new class action regime was introduced in 2015, and this is the second case brought under it.  The first action was an opt-out collective action seeking damages from Pride Mobility Products Limited on behalf of purchasers of Pride-branded mobility scooters in which the OFT (Office of Fair Trading)  found Pride had infringed competition law by prohibiting its retailers from advertising prices online below its recommended retail prices.

Sainsbury’s recently launched action against MasterCard for charging too-high fees and it won the case. MasterCard has appealed, and this appeal is still pending. It is likely that the consumer class action will hang on the outcome of the appeal, and therefore that MasterCard will stall proceedings until such time as it knows whether the appeal was successful.

Vast experience

Having said all that, however, Quinn Emanuel is something of a heavy hitter in this field, and would not readily take on such an action if it was not confident of winning, said a payment industry solicitor, speaking to EPI. The third-party litigation funder, Gerchen Keller Capital, certainly would not either.

“Any investigator undertakes due diligence, which is time- and cost-heavy, and the main question answered is whether or not they will win, continued the industry solicitor.

 “The fact that the funders are involved at this point suggests to me one of two things: They either think they’re going to win hands down at a trial at some point in the next two or three years, or they feel that there is going to be some kind of a settlement arrangement with MasterCard, which produces the cash and that cash will be their return on investment.

“It’s not unusual for these organisations to take perhaps 30 or 40% of the winnings – in some cases even more. “The fact that they’re involved suggests they think something good is going to happen and there’ll be a return on that investment.

“It is a big deal, and Quinn Emanuel is renowned in this sort of market. They’re a big, bold, brash US law firm and they wouldn’t take it on if it didn’t have something in it. The same can be said of the litigation funders, so it’s going to continue as a live issue for some time, I think.”

Would Quinn Emanuel prefer a settlement?

“Yes. I see that as being their strategy: make a lot of noise, broadcast widely that litigation funders are involved, and basically try to get MasterCard to the table.

Will MasterCard relent and settle? “I don’t know. They’ve been around a lot of tables, MasterCard, around this issue. MasterCard is not going to come to the table before the hearing in the Sainsbury’s retailer claim has run its course of appeal.” This could take between 12 and 18 months so we are looking at the second quarter of 2017, possibly.

What is the likely outcome?

If MasterCard wins the appeal against the Sainsbury’s judgment, it will give it considerable gravitas in the consumer class action case.

“They are entirely separate; however it will be a strong indicator and will give MasterCard a great confidence boost. “However, Quinn Emanuel will have taken this into account, and still is prepared to proceed. This is as strong a signal as any that things do not look good for MasterCard in this case.

“The consumer action has more credibility because that’s what competition law is all about – the protection of the consumer – whereas the retailer one has less obvious credibility, but I’m not privy to the detail.

“The Quinn Emanuel case is certainly not going to go away. It is not a publicity stunt.”

MasterCard maintains stance

MasterCard said it would “argue strongly that these claims do not meet the set criteria for a collective class action to proceed.”

At the tribunal hearing, MasterCard said it was “not a large class with largely identical individual claims. It is a massive class with disparate claims.”

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