UK Court Approves Settlement in Class Action Targeting Mastercard

A London court approved a settlement in a class action lawsuit brought against Mastercard over its swipe fees.

By approving the deal, the Competition Appeal Tribunal rejected a challenge by the litigation funder, Innsworth Advisors, which alleged that the settlement undervalued the claim, Bloomberg reported Friday (Feb. 21).

The 200-million-pound (about $253 million) settlement was reached in a case that was originally estimated to be worth 10 billion pounds (about $12.6 billion), according to the report.

The judge said the settlement “is being approved subject to finalization” of the details, per the report. A formal order will follow, the report said.

Mastercard and consumer advocate Walter Merricks announced an agreement in principle to settle the lawsuit during a Dec. 3 hearing before the Competition Appeal Tribunal.

The lawsuit was filed in 2016 by Merricks, who is a former financial ombudsman, and alleged anticompetitive card fees. It accused Mastercard of overcharging close to 60 million British residents over the course of 16 years.

Merricks claimed that the company charged exorbitant “interchange fees” — which retailers pay credit card companies when consumers shop with that card — and that those fees were passed on to consumers in the form of higher retail prices.

Mastercard countered that consumers derived valuable benefits from its payment technology.

When the settlement was announced in December, Merricks said: “I am very pleased that after nearly nine years of litigation with Mastercard, I have agreed to a settlement that I believe will deliver meaningful compensation to class members who choose to come forward to participate in the distribution of the damages.”

A Mastercard spokesperson said at the time: “We are pleased to have reached an agreement in principle to put this case behind us.”

However, the proposed settlement soon faced scrutiny from the case’s funder and faced criticism, as it raised concerns over the future of class action funding in the United Kingdom.

Innsworth Capital argued that the settlement was unfair, given that it spent over 45 million pounds (about $57 million) funding the legal battle. Innsworth will receive its legal costs, plus an additional 55 million pounds (about $70 million) from the payout, which it deemed insufficient in light of the resources it committed to the case.