Words by Law City Intern, Sabyia Ahmed
The Mastercard class action stands as one of the most significant competition litigation cases in UK history. It centres on allegations that Mastercard imposed excessive interchange fees on businesses processing card payments. These fees were not determined by market forces but were instead set by Mastercard itself, leading to increased costs for businesses. The claim argued that businesses passed these costs on to consumers through higher prices. This case was unprecedented because it was brought as a collective action on behalf of approximately 46 million UK consumers, making it the largest opt-out lawsuit under the UK’s Consumer Rights Act 2015. After years of legal proceedings, Mastercard has now agreed to a settlement reportedly worth around £200 million, subject to approval by the Competition Appeal Tribunal (CAT).
What Was Being Argued?
The central issue in this case was the role of Multilateral Interchange Fees (MIFs), which businesses were required to pay indirectly when processing card payments. When a business accepted a card payment, it paid a Merchant Service Charge (MSC) to its acquiring bank. A portion of this charge consisted of the MIF, which the acquiring bank paid to the cardholder’s bank for every transaction.
The key argument against Mastercard was that these fees were not determined through competition but were instead imposed by Mastercard and Visa. The claim alleged that this practice breached competition law by forcing businesses to bear unnecessary costs, which they then passed on to consumers through higher prices. Walter Merricks, the former Chief Ombudsman of the Financial Ombudsman Service, led the claim on behalf of UK consumers, seeking £14 billion in compensation. He argued that this sum reflected the total financial harm caused by Mastercard’s conduct.
The Legal Battle: Could This Case Proceed as a Class Action?
A major issue for the courts was not just whether Mastercard had breached competition law but whether the claim could be pursued as a collective action at all.
What Is a Collective Proceedings Order (CPO)?
A Collective Proceedings Order (CPO) allows a large group of individuals or entities with similar claims to bring a case collectively, rather than filing separate lawsuits. However, obtaining a CPO is not automatic. Claimants must seek approval from the Competition Appeal Tribunal (CAT), which assesses whether the case is suitable for collective proceedings.
Several factors determine whether the CAT will grant a CPO, including the suitability of the claims for collective proceedings, the type of collective action being pursued, the adequacy of the proposed class representative, the methodology for calculating damages, and the availability of funding for the litigation.
In this case, Walter Merricks sought to bring the claim on an opt-out basis, meaning that all affected consumers would automatically be included in the claim unless they actively chose to opt out. This was the first time a case of this scale had been pursued under the UK’s collective proceedings regime, making it a legal test case.
The Courts’ Rulings: A Five-Year Legal Battle
The legal journey of this case lasted five years, moving through the CAT, the Court of Appeal, and the Supreme Court before returning to the CAT.
The Competition Appeal Tribunal’s Initial Decision
In 2017, the CAT rejected the claim on the basis that there was no clear or workable methodology for calculating the damages owed to each individual consumer. The Tribunal also expressed concerns about the practicality of distributing compensation fairly among 46 million consumers.
The Court of Appeal’s Ruling
Walter Merricks appealed this decision, and in 2019 the Court of Appeal overturned the CAT’s ruling. The Court found that the CAT had applied an overly strict test in assessing whether the case was suitable for a collective action and held that the claim should be allowed to proceed.
The Supreme Court’s Final Word
Mastercard appealed the Court of Appeal’s decision, but in 2020, the Supreme Court ruled in favour of Merricks. The Supreme Court held that the CAT had applied the wrong legal test and clarified that the complexity of calculating damages should not prevent a collective action from being certified. This ruling was a major legal milestone, as it set a precedent for how collective proceedings should be assessed in the UK.
The Case Returns to the CAT
Following the Supreme Court’s decision, the case returned to the CAT for further consideration. During this period, negotiations for a potential settlement began.
Settlement Agreement: What Compensation Will Consumers Receive?
In December 2024, it was reported that Mastercard had agreed to settle the case for approximately £200 million. However, this settlement remains subject to approval by the CAT.
While £200 million represents a significant sum, it is substantially lower than the £14 billion originally sought. Given that the claim covered 46 million UK consumers, a key question remains as to how much each individual will receive and how compensation will be distributed. This issue is yet to be determined.
The Significance of This Case
The Mastercard class action is not just about interchange fees; it is about whether UK consumers can effectively challenge large corporations through collective litigation. This case was the first-ever opt-out class action brought under the Consumer Rights Act 2015 and has set a major precedent for future consumer claims.
It also highlights the evolving role of competition law in the UK. If large companies impose unfair fees that increase consumer costs, there is now a legal pathway to hold them accountable. The outcome of this case may encourage further class actions in areas beyond financial services, such as environmental claims and product liability cases.
Now that a settlement has been reached, attention will turn to how the compensation will be distributed and whether this case leads to a stronger framework for consumer collective actions in the UK. With more large-scale claims likely to follow, this ruling may well shape the future of class actions for years to come.
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