Defendants play their master card in settling UK consumers’ claim for £200 million

Last week, the Competition Appeal Tribunal approved the £200 million settlement of the long-running claim brought by Walter Merricks on behalf of UK consumers against Mastercard. However, the settlement made national headlines when the funder of the claim, Innsworth Capital, stepped in to block the settlement for being too low and has now reportedly started arbitration proceedings against Mr Merricks personally.

We examine what this judgment is likely to mean for litigation funders and other group action claims.

Background

In 2007, a European Court decision found that Mastercard had infringed competition law by setting a minimum price which merchants had to pay to their bank for accepting payments made by Mastercard. 

Following on from the European Court’s decision, Mr Merricks - the former Chief Executive of the Financial Ombudsman Service - brought his claim against Mastercard on behalf of an estimated 44 million UK consumers. The claim alleged that merchants had passed on the additional costs that they had been charged by Mastercard onto the consumers that Mr Merricks represented. As the claim related to competition law, it went ahead in the Competition Appeal Tribunal.

Mr Merricks estimated the total value of his claim to be around £14 billion and he obtained third-party funding from Innsworth, to cover the legal costs of the claim. In return for their investment, Innsworth would receive their investment back plus a share of any amount paid by Mastercard if the claim was successful.

Mr Merricks’ claim against Mastercard was started in 2016 and, after eight years of hard-fought litigation, it was announced in December 2024 that a settlement had been reached where Mastercard would pay £200 million – approximately only 1.5% of the total value of the original claim of £14 billion.

Innsworth tried immediately to block the settlement. At a recent hearing which had been scheduled to consider the settlement, Innsworth told the Tribunal that the settlement was too low and did not meet the required hurdle of being ‘just and reasonable in all the circumstances’. The Tribunal disagreed and approved the settlement, despite Innsworth’s objections. The Tribunal has yet to publish its written reasons for approving the settlement, with these expected in late March 2025.

It has also been reported that Innsworth started arbitration against Mr Merricks personally, arguing that he did not act in the best interests of the UK consumers when agreeing the settlement. In a surprising twist, Mastercard reportedly agreed to provide Mr Merricks with £10 million of funding to pay for his legal fees defending the arbitration now brought by Innsworth.

Comment

The Tribunal’s judgment is perhaps unsurprising. It found that the two parties, each with legal representation and having engaged in litigation for more than eight years, were best placed to decide what the appropriate level of settlement was. The judgment was resounding and delivered immediately following the hearing, rather than the Tribunal reserving its judgment to be given at a later date.

Whilst unsurprising, the judgment will send shockwaves through the litigation funding industry and the reasons for the judgment will be eagerly awaited. There is a simmering tension between funders, who are financially backing claims and want to have a say in settlements and what is in the best interests of the clients or the client groups. Funders will be nervous that this judgment gives a green light to clients simply to decide when and for how much to settle, without any proper input from the funders in that decision. Perhaps, even more concerningly for funders, given the volume of claims that are being funded against Mastercard (and Visa, arising out of the same facts), is the clear risk that Mastercard and Visa may adopt similar inventive approaches to settling these types of claim in the future.

However, it is not all plain sailing for the Claimants. They will now be nervous that they will face personal claims from funders if the settlement amounts they agree are not deemed high enough – potentially exposing them to personal financial losses.

We will provide a further update when the Tribunal releases the written reasons for its judgment. For now, there is a lot for all parties involved in litigation funding to consider.