Millions of UK consumers are currently embroiled in Britain’s biggest ever “class action” lawsuit — even if they don’t yet realise it.
Walter Merricks, the former financial ombudsman, is representing 46.2mn people in a £10bn lawsuit against company Mastercard payments, a case that is testing new ground in the English legal system.
Merricks claims that Mastercard infringed EU competition law by imposing unfair fees — known as “interchange fees” — on customers between May 1992 and June 2008 for the use of debit and credit cards. Mastercard contests the lawsuit, saying it is “confident that once the facts are presented in court, it will be thrown out”.
The action has paved the way for a British wave of US-style class actions — antitrust lawsuits filed on behalf of millions of consumers — against large companies such as BT, Apple and Qualcomm.
In 2015, the UK passed the Consumer Rights Act allowing for the first time collective suits on behalf of consumers and businesses over breaches of competition law. However, the legislation only gained momentum in the wake of a landmark Supreme Court ruling in late 2020 allowing Merricks’ case to proceed.
These types of lawsuits involve large numbers of consumers due to an “opt-out” clause, which means those who are potentially affected are automatically included unless they choose to “opt out.” As a result, many consumers have no inkling they are part of a lawsuit, say solicitors.
The flood of recent such cases in the UK has been underpinned by cash-rich litigation funders keen to deploy their capital by backing collective lawsuits. A recent study by law firm RPC found litigation funders had a £2.2bn “war chest” of capital to use.
“Class actions can bring big rewards for litigation funders,” said Chris Ross, partner at RPC. “They allow a funder to deploy a lot of capital at once as they are expensive cases to run, but they can also be efficient investment vehicles, because each class action can attract hundreds or thousands of claimants.”
“There has been an explosion of interest in this area over the past few years and this allows people to assert their rights,” said David Greene, senior partner at law firm Edwin Coe, who specializes in competition and shareholder claims, and who is also co-president of the Collective Redress Lawyers Association.
Since the 2015 legislation, seven class action lawsuits have been allowed to proceed to a trial, including a case on Friday, with at least a dozen more waiting approval. To proceed to trial, cases must first be heard and certified in the Competition Appeal Tribunal.
Large technology companies are fast becoming the targets of such class actions. The latest to be filed is a £768mn lawsuit, led by market researcher Justin Gutmann on behalf of 25mn UK iPhone users against Apple and which has yet to be certified; it claims the tech giant misled customers by allegedly concealing a tool in software updates that slowed their devices.
Apple said: “We have never — and would never — do anything to intentionally shorten the life of any Apple product, or degrade the user experience to drive customer upgrades.”
In another case, Which?, the Consumers’ Association, has brought a £480mn lawsuit against Qualcomm, the US chip supplier, on behalf of 29mn owners of Apple and Samsung phones. If successful at trial, it could see customers receive an estimated £5 and £30 each.
The case alleges the company abused its dominant position in relation to the royalties charged to smartphone manufacturers for the licensing of its patents for chipsets.
Qualcomm said the claims “have no merit and rehash old claims from a lawsuit brought by the Federal Trade Commission in the US — a lawsuit that Qualcomm won”.
Class actions are also being used to challenge the telecoms sector. BT is currently involved in an estimated £600mn class spearheaded lawsuit by Justin Le Patourel, a telecoms expert, on behalf of approximately 2.3mn BT landline customers.
The case centers on BT’s alleged abuse of its dominant position and could see consumers receive £200 to £500 each if successful. BT said: “We strongly disagree with the speculative claim being brought against us.”
Le Patourel believes the new legal regime is a vital tool to help consumers: “The opt-in regime is good . . . because many people don’t want to put their head above the parapet and would be reluctant to sign up to a legal case if they don’t know what it involves.”
Kate Pollock, partner and head of competition litigation at Stewarts Law, agrees that these collective actions are “one of the most active areas of litigation at the moment”.
However, lawyers say the new regime used in by the 2015 Consumer Rights Act has plenty of practical hurdles. Some question, for example, how easy it is to track down millions of customers who might be owed a few hundred pounds of compensation.
But many believe the legislation is now starting to deliver the promised change. “It has been helpful in allowing consumers and small businesses . . . to assert their rights,” said Luke Streetfeild, partner at law firm Hausfeld.
“It also creates a deterrent for businesses to engage in anti-competitive behaviour.”