A landmark class action lawsuit against Mastercard, once touted as the UK’s largest, has concluded with a £200 million settlement—far short of the £14 billion initially sought on behalf of 46 million consumers. This outcome has stirred controversy, with critics questioning the effectiveness of the UK’s burgeoning class action regime while defenders argue it remains an essential tool for consumer justice.
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A Groundbreaking Case Ends With a Whimper
The lawsuit, filed in 2016 by former financial ombudsman Walter Merricks, alleged that Mastercard unlawfully imposed excessive fees on transactions processed through its network over several years, leading to widespread overcharging of consumers. The case was one of the first major tests of the UK’s “opt-out” class action system, introduced in 2015 to allow consumers to collectively seek redress for anti-competitive practices.
Despite the initial excitement surrounding the claim—potentially offering hundreds of pounds in compensation per claimant—the final settlement equates to only a few pounds for each eligible consumer.
The Fallout of the £200 Million Deal
While Mastercard expressed relief at resolving the long-standing legal battle, the settlement has drawn criticism from multiple quarters:
- Litigation Funder’s Objections: Innsworth, a litigation funder owned by US hedge fund Elliott, has denounced the settlement as “too low” and accused Merricks and his legal team of rushing to settle. Innsworth argued that the agreement, reached without its consent, could undermine consumer interests and have a chilling effect on other class actions.
- Lawyers’ Concerns: Critics like Kenny Henderson, a partner at law firm CMS, warned that the payout highlights potential dysfunction in the system, stating, “It’s fairly likely that the lawyers will be paid more than will be distributed to the class members.”
Defending the UK Class Action Regime
Proponents of the system argue that the settlement, while modest, still represents progress for consumer justice. Charlie Morris, Chief Investment Officer at Woodsford Litigation Funding, described the class action regime as a vital mechanism for holding corporations accountable:
“The regime facilitates access to justice for consumers who wouldn’t otherwise have the means to bring claims individually. It also serves as private regulation, deterring anti-competitive behavior.”
Merricks’ lawyer, Boris Bronfentrinker, defended the settlement, emphasizing that eligible consumers could receive £40 to £50 each, provided a small portion of the class comes forward to claim compensation. He described the outcome as “a very good result” given the challenges of the case and the emergence of new evidence that reassessed the claim’s value.
Challenges Facing Litigation Funders
The Mastercard case has exposed tensions between litigation funders, law firms, and claimants. Innsworth’s opposition reflects the complex dynamics of these relationships, where funders may push for higher settlement amounts to maximize their returns.
This friction comes amid broader uncertainty for the litigation funding industry:
- A Supreme Court ruling in 2023 deemed agreements awarding funders a percentage of damages unenforceable, limiting their options for remuneration.
- The Civil Justice Council is currently reviewing the sector, with discussions of potential caps on funders’ financial returns.
Implications for Future Class Actions
The Mastercard settlement has been closely watched as a bellwether for the UK’s class action regime. While critics argue that the modest payout underscores the system’s flaws, supporters insist it is too early to judge its overall effectiveness.
Upcoming cases may offer further insight:
- A £1.3 billion claim against BT for overcharging 3 million landline customers reached trial earlier this year.
- Class action claims against other major companies, including Apple and Microsoft, are in progress.
Charles Balmain, a partner at White & Case, noted that funders may become more selective in financing future claims, but the appetite for such cases remains strong:
“Funders are likely to be more rigorous in evaluating potential claims, but the demand for corporate accountability through class actions isn’t going away.”
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Broader Lessons for Corporate Britain
The Mastercard settlement underscores the challenges of balancing consumer redress, litigation costs, and corporate accountability. Critics argue that lengthy legal battles and modest payouts may deter consumers from pursuing claims, while proponents contend that the mere existence of the regime pressures companies to comply with competition laws.
For corporate executives, the case serves as a stark reminder of the growing risks posed by collective lawsuits. As Balmain puts it:
“Each case is different, and the Mastercard settlement doesn’t necessarily signal a reprieve for companies facing class actions. This trend is here to stay.”
Looking Ahead
As the UK’s class action framework continues to evolve, future settlements and rulings will shape perceptions of its efficacy. While the Mastercard case may not have delivered the massive payouts initially envisioned, it has brought important questions about consumer justice and corporate accountability to the forefront.
For millions of claimants and companies, the ultimate verdict on the UK’s class action system remains unwritten.
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