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US firm uses opt-out collective action to launch £19bn claim against MasterCard

MasterCard: charges dispute

MasterCard: charges dispute

One of the first and certainly biggest of the new-style opt-out collective legal actions – backed by third-party funding – is to be brought against MasterCard over ‘illegal’ card charges. Damages could reach £19bn.

Funds affiliated with US-based litigation funder Gerchen Keller Capital will provide up to £40m in backing for the case.

Under the regime established by Consumer Rights Act 2015, all UK consumers who have lost out will automatically become part of the group of claimants unless they explicitly opt out.

According to Quinn Emmanuel, the US law firm bringing the action, MasterCard was found, following a long-running legal battle with the European Commission that ended in 2014, to have infringed EU law by imposing charges (known as ‘interchange’ fees) on the use of MasterCard debit and credit cards.

It said MasterCard had the option to accept that its card fees were set at an anti-competitive, high level and reach a settlement with the European Commission to lower its fees.

In a statement, Quinn Emmanuel continued: “It chose not to do that and instead imposed unlawfully high card fees for nearly 16 years and engaged in a legal battle for nearly 10 years. MasterCard lost this battle at every level and showed complete disregard for its cardholders and consumers at large, focusing instead on generating unlawful profits.

“Consumers were unaware of the level of these fees or that they were illegal. The fees were a significant cost for retailers that was then passed on through increased prices of goods and services. All UK consumers, including cash purchasers – not just MasterCard holders – have lost money as a result.

“Because MasterCard’s fees have already been found to be illegal by the commission, this ‘follow-on’ claim need only prove the damage consumers suffered as a result of MasterCard’s anticompetitive behaviour. Based on expert analysis using publicly available data, the total damage caused to UK consumers may be many billions and as much as £19bn. This will equate to hundreds of pounds in damages for every single UK consumer.”

The claim is being brought as Walter Merricks, a solicitor and one-time senior Law Society official who went on to be Chief Financial Services Ombudsman, as the class representative.

He said: “My aim is to get the redress to which UK consumers are entitled and to ensure that MasterCard cannot hold on to the illegal profits it made. This case should send a signal to companies that break competition laws at the expense of UK consumers that they do so at their financial peril.”

Boris Bronfentrinker, the lead partner at Quinn Emanuel and the head of its EU and competition litigation practice in the UK, said: “This is precisely the type of claim for which the new collective action regime was established. This is a landmark case where unlawful anti-competitive conduct has harmed UK consumers. That harm, likely to be in the hundreds of pounds, is not large enough for any individual consumer to bring their own claim.

“But by aggregating the claims and bringing them on a collective basis, all UK consumers who lost out will get the compensation they are owed.”

Paul Harris QC of Monckton Chambers and Marie Demetriou QC of Brick Court Chambers have also been instructed.

A MasterCard spokesman said: “MasterCard firmly disagrees with the basis of this legal claim. Electronic payments deliver real value to people online, instore and everywhere. MasterCard is committed to providing ever more convenient, safe and secure payments to all our customers, including consumers, retailers, governments and banks.”

The company added that the European Commission decision applied to interchange fees related to transactions that crossed borders within the EU. “That decision did not touch on domestic UK interchange fees; those were set on very specific market conditions. Attempting to equate those two is like comparing apples to oranges.”