Merricks v Mastercard: The Litigation Risks For The Financial Services Sector

• Published date: 02 February 2022
• Subject Matter: Finance and Banking, Anti-trust/Competition Law, Consumer Protection, Litigation, Mediation & Arbitration, Financial Services, Antitrust, EU Competition , Consumer Law, Class Actions
• Law Firm: Herbert Smith Freehills
• Author: Mr Chris Bushell, Ceri Morgan, Sarah Penfold, Daniel Woods and Nihar Lovell

KEY POINTS

• The Supreme Court's judgment in Merricks v Mastercard, and subsequent approval by the Competition Appeal Tribunal of the first application for a collective proceedings order under the UK's competition class action regime, represent a significant development for the future of class actions in this jurisdiction.
• These decisions will act primarily as a driver for growth of the competition collective proceedings regime, and may lead to a rise in group actions based on alleged competition law infringements against financial institutions (and other corporates).
• Merricks may also have repercussions for the wider litigation landscape, impacting reform of the existing class actions regime In particular for consumer collective actions, this would change the litigation risk for consumer-facing industries, such as the financial services sector

The recent decisions in the Merricks v Mastercard litigation will most obviously have a significant impact on the competition class actions regime, but may also have repercussions for the wider litigation landscape, particularly in relation to mass consumer claims. In this article, we consider the potential litigation risks for the financial services sector

Historically, the most common procedural mechanism for bringing class actions in the UK has been by way of a Group Litigation Order (GLO), which provides a procedural framework for the case management of individual claims giving rise to common or related issues of fact or law. Such claims are often contractual or tortious in nature, and there are a number of examples of high-profile claims against financial services firms in recent years that have proceeded under a GLO (for example, in relation to alleged misstatements in shareholder communications and allegations of financial mis-selling¹ ).

However, in one of the most significant rulings on class action procedure to date, last year the Supreme Court provided some important clarifications on the UK competition class action regime in Merricks v Mastercard, leading to the first application for a collective proceedings order (CPO) being approved by the Competition Appeal Tribunal (CAT) in August 2021. For the reasons discussed in this article, the competition regime has features that are perceived as "claimant-friendly", and its endorsement has triggered a series of further CPO applications. The anticipated growth of the regime following the decision in Merricks is likely to have an impact beyond the sphere of competition law, and this article explores the potential ramifications for class actions in the financial services sector.

THE COMPETITION CLASS ACTIONS REGIME

Competition law infringements are a classic example of where a legal wrong can cause loss to a very large number of potential claimants. These potential claimants are often consumers or small businesses...