Regulation

Class Action Vs. MasterCard Looms In UK

MasterCard-Walter-Merricks-cross-border-fee-lawsuit

If it’s a day with a vowel in it, it must be a day to mobilize the troops and think about suing the card networks. Today’s latest is a report that a class action lawsuit might be happening across the pond against MasterCard this fall.

The latest possible legal salvo follows, of course, the news last week that the $7.25 billion antitrust settlement that included the marquee names in cards, Visa and MasterCard, and millions of retailers was thrown out on the grounds that a number of retailers were improperly represented. That voided case, and the one that may come in the U.K., focus on interchange fees assessed when consumers use their cards to pay in store.

Bloomberg reported today (Wednesday, July 6) that consumers are organizing to bring a class action to suit to bear against MasterCard that would be in the neighborhood of $24 billion, tied to a European Union court decision that hearkens back to 2014. That decision ruled that the processing fees levied by MasterCard in conjunction with cross-border transactions were unfair. A class action of this size would be the biggest one in the U.K. to date and would mark a milestone of sorts, coming in as the first one that would be filed through the Consumer Rights Act, passed last year.

The newswire reported that Walter Merricks, an attorney who notably was at the helm of the U.K. agency that worked with banks on consumer disputes (the Financial Ombudsman Service), has brought the law firm Quinn Emanuel Urquhart & Sullivan LLP to draft the suit. The timing seems to be one with haste, as the suit – if there is one — is likely to be filed by September, according to Bloomberg, citing a statement by Merricks.

The Merricks-led class action would be the latest salvo in the lawsuits faced by MasterCard across the E.U., where the contention is that the fees charged on cross-border transactions have been alleged to restrict competition, unfairly so. Under the terms of the Consumer Rights Act, all consumers deemed to have been affected by these practices (if ruled unfair) would become part of the class action suit.

Merrick’s statement detailing his intentions contended that the prices of everything we all bought from 1992 to 2008 were higher than they should have been as a result of the unlawful conduct of MasterCard. My aim is to get the redress to which U.K. consumers are entitled and to ensure that MasterCard cannot hold on to the illegal profits.”

Caveats abound here: The news Wednesday represents an intent to file, which means other hurdles must be cleared before any class action actually proceeds. In this case, the judge must deign to accept the class action suit before it can proceed. That is no certainty.

If past might be prologue, it should be noted that similar cases in the past, in the United States, have argued similar harm to consumers – and those cases ultimately were dismissed due to lack of evidence that tangible harm befell consumers as a result of interchange fees paid by merchants.

From the vantage point of the card companies, as MasterCard has noted online, interchange fees, in effect, are a cost of doing business and factor into innovation as the card issuer, the retailer and the acquirer (what the industry calls the retailer’s or merchant’s bank) all pay a small portion of the cost. By sharing the costs among ALL of those who benefit from the transaction, consumers and merchants obtain the full value of our technology at costs that are much lower than they could achieve if they paid the costs on their own.”

Food for thought: What one taketh away, one taketh away. Capped interchange fees often hit consumers in their pocketbooks as rewards – funded in part by interchange – hit the skids. Australia is the poster child for this, where regulation there will cap interchange fees going forward – and banks are now scaling back on rewards programs.

“All too often in class action cases, the only winners are the lawyers,” contended MasterCard. “If past experience is any indication, even the lawyers will be losers in this one.”

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