“Run-off periods aren’t unlimited” says CAT in Merricks v Mastercard

While 2008 was synonymous with the Beijing Olympics, the stepping down of Fidel Castro and the bankruptcy of Lehman Brothers, it seemed that by 2016 many people had moved on. However, according to Walter Merricks, 46.2 million people were still suffering in 2016 as a result of Mastercard’s infringement, which ended in 2008.

Six years after commencing proceedings in 2016, on 5 September 2022, Merricks applied to re-amend the claim form in the Merricks v Mastercard collective proceedings (Walter Hugh Merricks CBE v Mastercard Incorporated and Others (1266/7/7/16)). Parties to long-running litigation will be familiar with the rigmarole of amending pleadings, but one particular change was perhaps surprising in its scope, given that the collective proceedings had already been certified on prior boundaries.

The claim as previously pleaded covered broadly the same period (22 May 1992 to 19 December 2007) as the infringement period found in the European Commission’s infringement decision on which the Merricks collective proceedings rely, save that the claim period extended to 21 June 2008 on the basis that Mastercard did not reduce the relevant EEA multilateral interchange fees (MIFs) until that date (Decision C (2007) 6474 in Cases COMP/34.579 Mastercard, COMP/36.518 EuroCommerce and COMP/38.580 Commercial Cards).

Merricks had a two-pronged approach to seek to expand the nearly 16-year claim period a further eight years. The first prong related to merchant service charges (MSCs). Merricks argued that, after the infringement period, cross-border and domestic UK MSCs remained at inflated levels compared with the levels that would have been charged absent the infringement, because reductions in the interchange fees paid by acquiring banks were not fully reflected in the MSCs charged by acquiring banks to merchants.

The second prong related to the level of domestic interchange fees, which Merricks alleges were unlawfully inflated by the EEA MIFs. He argued that, to the extent that UK domestic interchange fees did not fall once the EEA MIFs were reduced, those fees remained at inflated levels caused by the infringement and continued to be higher than they would have been without.

Why eight years?

The Competition Appeal Tribunal found in its judgment (Walter Hugh Merricks CBE v Mastercard Incorporated and Others [2022] CAT 43) that an eight-year run-off period was not pragmatic but arbitrary, and unsupported by Mastercard’s defence. It considered that the more time that had passed since the infringement period, the less significant the level of interchange fees in 2008 will have been in influencing MSCs or domestic interchange fees. The tribunal was concerned that permitting the claim period to increase by over 50% would add substantially to the complexity and cost of already extremely complicated proceedings and give rise to further delay.

The tribunal considered that it would be reasonable to assume that the banks would have reviewed the domestic UK interchange fees at least once a year and possibly more often, and therefore the tribunal could envisage a delay/run off period of up to 12 months. To seek to determine the extent to which the level of the EEA MIFs in 2008 affected the level of Mastercard’s domestic interchange fees in 2010, let alone in 2015, would be exceptionally complex. For MSCs, the tribunal anticipated a longer run off period of two years, since MSCs do not automatically change as the MIF changes, unless the merchant has a MIF++ contract.

Should defendants be nervous at the prospect that the claims that they are defending will balloon in scope? Possibly, but as the tribunal made clear, this is not without limits and claimants need to provide justification for the run-off periods for which they contend.

The Merricks saga continues.