Key takeaways
CAT approves £200m Mastercard settlement
Tribunal confirms terms are just and reasonable.
Funder’s challenge fails to sway outcome
CAT permits intervention but upholds the deal.
Case highlights funder influence limits
Approval clarifies role in strategic decisions.
The Competition Appeals Tribunal (CAT) has recently approved a settlement of £200 million in the long-running consumer class action by Walter Merricks against Mastercard.
Merricks’ claim was brought around 8 years ago on behalf of some 44 million consumers in the UK. It was reported in the media in the early stages of the action as having been potentially valued at around £14 billion.
Provisional settlement and funder’s intervention
The parties reached provisional agreement to settle the collective proceedings in December 2024 and in January 2025 filed a collective settlement approval order (CSAO) application to seek the CAT’s approval for the settlement as required.
In an unusual development, the litigation funder for the claim by Merricks (Innsworth Capital Limited) applied for permission to intervene in the CSAO application to challenge the provisional settlement. The funder’s stance was that the provisional settlement fell short of meeting the statutory requirement of being “just and reasonable”.
The CAT granted permission for the funder to intervene on the basis that it had sufficient interest in the settlement as it would be impacted by the proposed distribution arrangements.
The Tribunal noted when granting permission that this would not be allowed to become a mini-trial of a litigation funding dispute.
Proposed distribution
The proposed distribution of the settlement sum would see affected consumers paid the first £100 million and the funder paid approximately £47 million to cover its costs incurred, with the balance of approximately £54 million to be paid to the funder by way of a return.
Key submissions
The funder highlighted that the proposed settlement figure of £200 million was far lower than the original estimate of damages and that the total sum available for distribution would result in substantially lower returns than had been provided for in the litigation funding agreement.
The funder is understood to have incurred costs of approximately £47 million and argued that the provisional settlement under which it would receive a maximum of £100 million was unfair.
It maintained that Merricks could have extracted a higher settlement sum in future negotiations.
Merricks’ lawyers asserted that the provisional settlement would bring certainty in circumstances where there was a risk that consumers could end up with less or nothing if the litigation was to continue. The CAT heard submissions that the various adverse judgments made in the course of the collective proceedings (and in particular the CAT’s ruling in 2024 on causation) had dramatically reduced the value of the claim. The CAT was told that £200 million is a very significant sum of money and that £100 million would go to consumers.
Counsel for Mastercard submitted that the settlement sum represented a higher figure than that which the class could expect to recover if the litigation continued and that no higher offer would have been forthcoming.
Approval by the CAT
The CAT approved the provisional settlement after hearing submissions on 21 February 2025. Justice Roth recorded:
"Looking at the matter today, we have no doubt that a settlement of £200m on the terms proposed is just and reasonable.”
The CAT further noted:
"The fact that the outcome has been disappointing in the light of how the evidence and the rulings had developed does not detract from that.”
What next?
The written reasons for the CAT’s decision are due to be delivered in a written judgment later this month (March 2025). It is expected to deal with how the £200 million settlement sum is to be distributed to include the funder’s return on investment and legal costs incurred.
The judgment should also shed some interesting light on the CAT’s thinking as regards the approval of negotiated settlements in cases such as this and in particular the role of third party litigation funders and the extent of their ability to dictate and/or influence key strategic decisions such as settlement.
The possibility remains of course that this judgment once delivered and scrutinized could be appealed.
Reports also suggest that the funder has issued arbitration proceedings against Mr Merricks alleging a failure to use best endeavours to deliver its anticipated return by way of the settlement. That is reported to have been estimated in the original litigation funding agreement at £400 million with the funder covering £40 million of costs. Reports also indicate that Mastercard agreed to cover up to £10 million of Merricks’ costs of defending that arbitration claim.
The wider interchange fee litigation will of course continue apace, with a “pass on” trial listed before the CAT to start later this month (March 2025).
Concluding comments
The CAT appears to have had little difficulty in concluding that the settlement was just and reasonable in the circumstances of this litigation. The initial headline grabbing claim value has been massively eroded after many years of hard fought and expensive litigation, resulting in settlement at just a fraction of that original value. Legal costs and a return for the funder will then eat up a sizeable chunk of what is to be paid in settlement.
The settlement will of course therefore fuel further debate as to whether or not the current class action regime adequately provides for and protects the interests of consumers and the extent to which the regime might be expanded in the future.
For further information on this topic, please contact Paul Walsh.
