Limitation in collective actions: You don’t know what you don’t know, but should you?

In June 2024, the UK Competition Appeal Tribunal (“Tribunal”) handed down a judgment in the Merricks v Mastercard collective action which found that the first five years of the claim are time-barred.[1] In reaching this finding, the Tribunal rejected Merricks’ arguments that Mastercard had deliberately concealed relevant facts or committed a breach of statutory duty.

The facts surrounding this judgment, which is the first for the Tribunal in considering the application of the principle of effectiveness in collective actions, is the latest setback in the Merricks collective proceedings which may have wider implications for class representatives bringing collective claims. This article explores the Tribunal’s analysis of the specific facts of Merricks, and considers the thorny issue of limitation in other cases such that Merricks illustrates the need for a wider review of the Tribunal’s limitation rules in the context of consumer actions.

Part 1: The Tribunal’s judgment

In September 2016, Merricks brought his claim for damages on a follow-on basis from the European Commission’s decision of 19 December 2007 finding that Mastercard had infringed Article 101 of the Treaty on the Functioning of the European Union (“TFEU”). Those claims were brought on behalf of an estimated 45.5 million class members, who, between May 1992 and June 2010, purchased goods or services from businesses accepting Mastercard cards. The estimated level of aggregate damages at the time of filing was £10 billion.

Insofar as the claims are governed by English law, Mastercard argued that the claims relating to infringements before 20 June 1997 were time barred pursuant to the primary limitation period of six years under s.2 or s.9 Limitation Act 1980 (“LA 1980”).[2] However, Merricks contended that the operation of the six-year limitation period was suspended primarily pursuant to s.32(1)(b) LA 1980, where a fact relevant to the claimant’s right of action has been deliberately concealed, the limitation period shall not begin to run until the claimant discovers the concealment or could have discovered it with reasonable diligence[3] which requires a factual enquiry to determine at what point sufficient facts were in the public domain. Alternatively, Merricks argued that the limitation period for claims before 20 June 1997 was overridden by the EU principle of effectiveness.

a. Deliberate concealment of relevant facts

Recent case-law has clarified the test for reasonable diligence for the purposes of s.32(1)(b) LA 1980, in particular:

• The Court of Appeal in Granville[4] confirmed that the purpose of this provision is to ensure that a claimant is not disadvantaged by reason of not being aware of facts giving rise to the cause of action – such that any unfairness to the claimant is avoided. The Court of Appeal made clear that the question as to whether the claimant could have discovered certain facts with reasonable diligence depends on the context in which the issue arises and the particular circumstances of the claimant. Whilst the test is an objective one, it refers to the circumstances of the actual claimant in each case. The question relevant to the reasonable diligence test is, as the High Court stated, not what the claimant shouldhave discovered, but whether it could have done so having exercised reasonable diligence.

• The Court of Appeal in DSG Retail Ltd v Mastercard Inc[5] also held that no matter how much information is available in the public domain, it is not necessarily the case that a claimant could have seen the relevant press releases announcing a competition authority investigation with reasonable diligence, and therefore discover facts relevant to their potential claim: “huge numbers of documents are in the public domain; it does not follow that, even objectively judged, a potential claimant was on notice of a particular claim, or that it could with reasonable diligence have seen particular documents”.

Merricks argued that four relevant facts had been deliberately concealed by Mastercard in relation to its EEA multilateral interchange fees (“EEA MIFs”): (i) that there was an EEA MIF applying to cross-border transactions; (ii) that the EEA MIF was set by Mastercard; (iii) that the EEA MIF was set above zero during the relevant period; and (iv) that the EEA MIF acted as a fallback interchange fee for domestic transactions[6]. The Tribunal’s conclusion was that no relevant facts had been deliberately concealed.

Facts (i) and (ii): existence of EEA MIF and the fact it was set by Mastercard

Merricks relied on confidentiality assertions by Mastercard on a report published on competition in the UK retail banking sector as well as Mastercard’s representations on redactions for the non-confidential version of its Statement of Objections as evidence that Mastercard sought to keep the existence of the EEA MIF confidential (and therefore deliberately concealed). However, those redactions related to specific rates of various MIFs and information on Mastercard’s MIF methodology and not the existence of cross-border MIFs themselves, which both documents confirmed.

On the contrary, the Tribunal found that the existence of the EEA MIF and its application to cross-border transactions was publicly known, and it had been discussed in public documents. It was therefore not a concealed fact. The witnesses (for both sides) confirmed that all banks in the UK were aware of the existence of cross-border interchange fees. As regards EEA MIF setting by Mastercard, the Tribunal found that Mastercard did not conceal this fact either, noting that Visa also set EEA MIFs for transactions on its card system and that only the card schemes could set international MIFs.

Fact (iii): the EEA MIF was above zero

Merricks argued that the relevant fact of the EEA MIF being above zero was not disclosed in a way that would allow affected persons to understand the impact of the EEA MIF. The Tribunal disagreed, and noted the fact of an EEA MIF was publicly available information and that there were public documents and reports available that indicated the rates of the MIFs, which were accessible to anyone who wanted to understand Mastercard’s fee structures. The Tribunal therefore found that there was no deliberate concealment of this fact by Mastercard.

Fact (iv): EEA MIFs as a fallback for domestic transactions

Citing the Court of Appeal in DSG, the Tribunal found that EEA MIFs were not essential elements of the cause of action, and it did not therefore accept that EEA MIFs acting as a fallback rate for domestic transactions was a relevant fact. Accordingly, the Tribunal did not need to consider whether the fact was discoverable with reasonable diligence. If the Tribunal had to decide on the issue of reasonable discoverability, the Tribunal indicated that it would find that the relevant fact of the existence of the EEA MIF was not commonly known among consumers and that there was nothing to put the average class member on notice to investigate a potential claim against Mastercard. Notwithstanding this, the Tribunal considered it was “unsatisfactory” in collective proceedings to apply the reasonable discoverability test to an average class member/consumer when it was the class representative who needed to discover the relevant fact(s) to initiate proceedings. In any event, the Tribunal noted the “obvious difficulties” in applying the statutory language of s.32(1)(b) LA 1980 to the class representative.

b. EU principle of effectiveness

Merricks also relied on the principle of effectiveness under EU law which requires that EU rights are afforded effective protection including by their direct enforcement before national courts. Counsel for Merricks submitted that even if the EU principle of effectiveness did not include any requirement of concealment, the limitation period should not start to run if the relevant facts could not reasonably be discovered by the claimant. Merricks relied principally on the Court of Justice of the European Union (“CJEU”) cases Cegeco[7], Volvo[8] and Heureka[9](judgment in Heureka had been issued shortly after the hearing and the Tribunal had therefore invited the parties to make short submissions). That line of cases represents the development of the application of the effectiveness principle in relation to limitation issues by the CJEU:

• Cegeco concerned a reference from the Portuguese court to the CJEU on whether a limitation period of three years from the date on which the injured party was aware of their right was incompatible with general principles of EU law. The CJEU recognised that all the elements of the Portuguese rules on limitation should be considered. The three-year limitation period on its own may not be contrary to the principle of effectiveness, however, the combination of the three-year limitation period with the lack of the requirement for the injured party to know the infringer’s identity and the fact that the limitation period could not be suspended during proceedings with the national competition authority did engage the principle of effectiveness.

• Volvo involved a cartel in which none of the relevant facts for the purposes of limitation was in the public domain. Under Spanish law, the limitation period was one year and only started to run from the time when the circumstances giving rise to the liability became known to the claimant. The question before the CJEU was whether the claimant would have had sufficient information about the cartel from the Commission’s press release announcing the decision or from the publication of the summary of the decision in the Official Journal. The CJEU answered that it was the publication of the summary decision that triggered the limitation period and so indicated that a limitation period under national law could not commence before the infringement of competition law had ceased.

• The CJEU provided further explanation in the recent case of Heureka. This case involved a preliminary ruling on the compatibility of the Czech limitation period with EU law. It was held that the principle of effectiveness required the suspension of limitation periods during the Commission’s investigation to allow the injured party to assess whether an infringement has been committed, the scope of the infringement, and its duration.

Conversely, Mastercard relied primarily on Arcadia Group Brands Limited & Others v Visa Inc & Others[10]as the binding English authority that s.32 LA 1980 complies with the EU principle of effectiveness – a case which was also brought in the context of the interchange fee litigation. In Arcadia, the claimants argued that if their claims did not fall within s.32(1)(b) LA 1980 and were therefore statute-barred, that limitation period was overridden by the EU principle of effectiveness. This argument was rejected by the Court of Appeal[11]. The Court of Appeal also rejected the argument that Article 10(2) of the Damages Directive (which provides that limitation periods shall not run before the infringement has ceased and the claimant knows or is reasonably expected to know certain aspects relating to the infringement/the infringer) applied retroactively[12].

It was common ground that Volvo and Heureka, as post-Brexit cases, were not binding on the Tribunal, in contrast to Cogeco.

When considering Cogeco alongside Arcadia, the Tribunal did not accept that Cogeco followed a different approach. The principle of effectiveness was engaged in Cogeco due to a combination of factors. The Tribunal also rejected the argument by Merricks that Cogeco established the proposition that a limitation period cannot start to run before the claimant knew that it has suffered harm as a result of the unlawful conduct. It is notable that – whilst English law lacks any suspensory mechanism prior to 2017 (further discussed below) – the standard English limitation period of six years is longer than the Portuguese limitation period.

Part 2: The impact of the Tribunal’s judgment on collective actions

a. Reasonable discoverability test in collective proceedings

As noted above, the concept of concealment could allow for the limitation period to be extended. For the first time in a Tribunal collective action, the question was raised as to who, in the context of collective proceedings, should be the relevant party for the purposes of determining whether the relevant facts should be discovered with reasonable diligence. Is it the class representative who spearheads the action, or is it the underlying class members as the ultimate beneficiaries of any resulting damages?

The Tribunal held that the application of the test is as against the class representative (although it also noted the difficulties in applying that test to the class representative due to the language of s.32(1)(b) LA 1980). The suggestion that the reasonable discoverability test should be directed to the class representative, rather than the average class member/consumer, sits awkwardly with the suitability requirement for class representatives set out in the Tribunal Rules[13]. When assessing suitability, the Tribunal considers whether the proposed class representative is (amongst other things) competent to manage large and complex litigation. Although it does not follow that an individual that meets this requirement needs to be representative of an average class member/consumer, being the underlying claimants, the class representative does need to act in the best interest of the class when conducting the litigation.

As to class members, the Tribunal noted a paradox in the concept of the “average class member” or “average consumer”. The provisions of the LA 1980 are expressed in terms of time by which an action must be brought and the suspensory mechanism is by reference to the reasonable discoverability of particular circumstances by “the plaintiff”. This caused the Tribunal to favour the class representative as the person bringing the claim, pursuant to the statutory language of the LA 1980, despite the Tribunal’s acknowledgement that, even when proceedings were commenced by Merricks in 2016, the average consumer was not on notice that there was any reason to make inquiries or discover the relevant facts because the Commission’s Decision – on which the proceedings are based – would not have featured in the popular news media. As a result, the Tribunal held it “unsatisfactory in collective proceedings to apply the reasonable discoverability test to the average class member/consumer when it is the [class representative] who needed to discover the relevant facts in order to start the proceedings”. This is perhaps a restrictive interpretation of the LA 1980, given the almost four decades between those provisions and the Consumer Rights Act 2015 (“CRA 2015”) which introduced the opt-out collective regime.

The Tribunal also struggled with how to properly define the “average class member”, noting the specifics of this case where the class comprises, in effect, the entire adult population of the UK and the relevant facts which concern arrangements between banks for settling debit/credit card transactions. Whilst obiter, it is telling that the Tribunal acknowledged that the relevant foundation of the claim (i.e., the existence of the cross-border MIF), although not confidential was not commonly known among consumers. In addition, there was nothing to put consumers on notice to investigate whether they might have a claim, citing in support the infrequency of press reports which appears in sections in newspapers which the average class member did not read. In addition, the Tribunal held that concealment would not have to be directed at consumers/class members.

As a result, the recent Merricks limitation judgment could have a chilling effect on the suitability requirement, and potentially on the collective proceedings regime altogether, which will prioritise (in large part) the knowledge of the class representative over the knowledge of the class members. A particular distinguishing factor in Merricks is that Mr Merricks was held to have some level of knowledge given his prior background as a solicitor who worked at the Insurance Ombudsman and the Financial Ombudsman Service meaning that, in the Tribunal’s words, he was “very far from being an average class member”. This is however the exception and not the norm, given that class representatives are not required to have prior knowledge or involvement in the relevant industry. Moreover, some class representatives are incorporated entities who have been established with the sole purpose of pursuing a collective claim.

b. Access to justice for injured parties

As the UK Supreme Court noted in Merricks, one of the objectives of the collective proceedings regime is to facilitate access to justice for those with small but potentially meritorious claims. Whilst the Supreme Court’s judgment was concerned with the threshold to meet at the certification stage, its comments are equally applicable as to the raison d’être of the regime – and the objective of the statutory regime to facilitate, rather than to impede, the vindication of consumer rights. In the context of competition infringements, the subject matter is often complex and consumers are usually indirect purchasers to whom an anticompetitive overcharge has been passed on. In that context, consumers are unlikely to have the direct knowledge, experience, or expertise to bring their own action.

It follows from the Tribunal’s judgment that the threshold for establishing deliberate concealment remains a high bar, meaning that class representatives will continue to incur difficulty in using it as a means of extending the limitation period for claims. On the facts of the case, the Tribunal found that references in certain public documents supported that Mastercard had not engaged in deliberate concealment. The fact that details on rates had been redacted and the assertion of confidentiality by Mastercard in certain agreements was insufficient. The Tribunal did, however, note that it did not consider that concealment would have to be specifically directed at consumers or class members – had Mastercard deliberately concealed relevant facts from the banks that would have meant that those facts would have been kept from consumers. In circumstances where there is typically a significant asymmetry of information between class representatives/claimants and defendants in collective actions, the current law on the deliberate concealment test – coupled with the standard of knowledge to be expected of average consumers – does little to redress that imbalance.

In cartel cases, the deliberate concealment is clear from the context of the anticompetitive behaviour. Conversely, would-be claimants in respect of other forms of anti-competitive conduct face a less advantageous position on the application of the limitation rules.[14] As noted above, the Tribunal’s judgment provides no guidance as to when limitation starts to run in the context of what is available in the public domain from the perspective of the average class member/consumer.

c. EU principle of effectiveness

As things stand in caselaw, class representatives will find little assistance in the EU principle of effectiveness to extend a limitation period because this does not impose a “hard-edged rule…that the limitation period cannot begin to run until the ‘average class member’ can reasonably be expected to discover the relevant facts” such that it requires “displacement of national limitation provisions”.

It is however notable that the Tribunal’s decision in Volvo[15] in relation to the application of the cessation requirement to limitation in the interchange proceedings is pending appeal before the Court of Appeal. In the Merricks judgment, the Tribunal noted that the application of the EU principle of effectiveness was not constrained in the same way as s.32(1)(b) LA 1980, and that it considered the knowledge requirement should apply to the class representative. This would have the effect of raising the bar for any arguments in relation to limitation under the EU principle of effectiveness.

Looking ahead

The Tribunal’s judgment could have a chilling effect on the application of limitation rules in collective proceedings or potentially on the ability for such proceedings to be brought altogether. However, as explored above there remain aspects of the limitation regime which remain to be fully tested and which fell beyond the bounds of the issues in Merricks. Merricks has however obtained permission to appeal the Tribunal’s ruling with respect to its findings on Cogeco. In granting permission, the Tribunal recognised the growth of collective claims and the potential wide implication of its ruling as regards the application of the effectiveness principle – noting that its judgment, which impacts the first five years out of the eighteen year claim period, is “undoubtedly of great practical significance”.

The Merricks judgment, as evidenced by the reasons granting permission to appeal, is perhaps the latest example of why a further review of the Tribunal Rules is necessary to ensure that the collective actions regime is able to give effect to the vindication of consumer rights, and that issues pertaining to limitation should not present an insurmountable barrier to ensuring justice. Any future review of the limitation provisions should consider a harmonisation of the rules to give earlier effect to the suspensory mechanism in the Damages Directive, and to clarify the standard of knowledge which is expected from class representatives and/or class members to ensure that those who are harmed by anti-competitive practices are able to obtain damages through effective private enforcement.

*Luke Grimes is Senior Associate and Pierre Welch is an Associate in London.

Footnotes

[1] [2024] CAT 41.
[2] The claim period for the Merricks follow-on claim extends back to the date of the infringement as set out in the Commission’s decision: 22 May 1992. However, Mastercard argued that claims before 20 June 1997 were time barred – this is the date six years prior to the date upon which the Competition Appeal Tribunal Rules 2003 came into effect (20 June 2003). Under Rule 31(4) of the 2003 rules, claims for damages could not be brought where the claimant would be prevented from doing so by the limitation period having expired by 20 June 2003.
[3] Limitation Act, section 32 (1): “…, where in the case of any action for which a period of limitation is prescribed by this Act, … … (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; … the period of limitation shall not begin to run until the plaintiff has discovered the … concealment … or could with reasonable diligence have discovered it.”
[4] OT Computers Limited (In Liquidation) v Infineon Technologies AG, Micron Europe Limited [2021] EWCA Civ 501.
[5] [2020] EWCA Civ 671.
[6] At the outset of the hearing, Merricks contended that the actual levels of MIFs set by Mastercard and its methodology for setting those MIFs were also relevant facts for the purposes of s.32 LA 1980; however, these additional factors were dropped during the trial.
[7] Case C-637/17.
[8] Case C-267/20.
[9] Case C-605/21.
[10] [2015] EWCA Civ 883.
[11] Ibid., at [75] Sir Terence Etherton C stated: “… there is no basis for concluding that a limitation period of six years for a competition claim, with the benefit of the postponement provisions in section 32(1)(b) of the 1980 Act, is in principle incompatible with the EU principle of effectiveness.”
[12] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance (“Damages Directive”): “Limitation periods shall not begin to run before the infringement of competition law has ceased and the claimant knows, or can reasonably be expected to know: (a) of the behaviour and the fact that it constitutes an infringement of competition law; (b) of the fact that the infringement of competition law caused harm to it; and (c) the identity of the infringer.”
[13] Tribunal Rules, Rule 78(3); Guide to Proceedings, paragraph 6.30.
[14] This is also exacerbated by the fact that the CRA 2015 dispensed with the former rule that a follow-on action may be brought within two years, two months and ten days of the publication of a decision for claims relating to Commission Decisions, or two years and two months for Competition and Markets Authority decisions (subject to appeals), and which did not discriminate as between the nature of the infringement.
[15] Umbrella Interchange Fee Claimants v Umbrella Interchange Fee Defendants, and Walter Hugh Merricks CBE v Mastercard Incorporated and others [2023] CAT 49.