Merricks: I was wise to ignore funder’s pressure
Collective action pioneer Walter Merricks and his litigation funder are at loggerheads once more in the wake of the latest Competition Appeals Tribunal (CAT) ruling on interchange fees.
Mr Merricks’ claim that the judgment vindicated his decision last year to settle [1] his one-time £14bn claim for £200m comes the week after Innsworth was granted permission to appeal the CAT decision on how the money will be distributed.
The pair have been engaged in a very public war of words [2] since Mr Merricks’ decision to settle, which Innsworth opposed.
The CAT ruled last July that multi-lateral interchange fees imposed by Mastercard and Visa on banks which administer credit-card payments prevent, restrict or distort competition.
This week, in the second stage of the case, the CAT held that while banks passed on these costs to merchants, merchants in 13 of 16 sectors analysed did not pass them on to consumers. The three exceptions were cash services, insurance underwriting and travel.
Mr Merricks was representing consumers. In a statement issued yesterday, he said: “This judgment shows that I was wise to ignore pressure from Innsworth to continue with the case rather than to settle with Mastercard when I did.
“This was a difficult judgment call, but the risk of the class losing everything was not worth running when there was a substantial sum on the table, a good proportion of which can soon be distributed to class members.”
His solicitor, Boris Bronfentrinker, a partner at Wilkie Farr & Gallagher, said the decision provided “a complete and comprehensive vindication of the decision” to settle; the claim would have failed.
He said: “The tribunal determined that Mastercard (and Visa) failed to establish their legal defence of pass-on, namely that there was a direct causal link between the unlawful interchange fees and the retail prices charged by merchants, despite the practical reality that over the long run merchants will be recovering all their costs to ensure they do not go out of business.
“Mr Merricks correctly valued the pass-on risks and chose the correct moment to settle his claim. This only reinforces the decision of the tribunal that approved the settlement.”
Mr Bronfentrinker continued: “The failure of Innsworth and those advising it to appreciate and understand the legal issues and risks in play, is staggering.
“At a time when the position of litigation funders is being considered by the government following the Civil Justice Council’s report and the government is also reviewing the collective action regime, the conduct of a funder such as Innsworth just demonstrates that it is essential that funders are kept away from the conduct of complex competition disputes that they are simply not well placed to involve themselves in.”
The solicitor insisted that Innsworth should now be “publicly acknowledging the way in which Mr Merricks successfully resolved the claim, securing a substantial sum for the class and ensuring that Innsworth is paid back not only what it invested in the claim but also a return”.
Instead, it was bringing the judicial review to seek a greater share of the £200m and continued to pursue Mr Merricks in arbitration for failing to use his best endeavours to maximise its return, “even though, but for Mr Merricks and the settlement he negotiated, Innsworth would have received nothing and would have had to pay out millions in costs to Mastercard”, Mr Bronfentrinker said.
In response, an Innsworth statement said: “More than £40m was spent by Mr Merricks on his case under his conduct, and on the advice of Mr Bronfentrinker – whose law firms earned over £28m, for a case they both stated publicly was worth over £14 billion – which was on the basis that there was more than 90% pass-on.
“The comments made by them raise serious questions about the conduct of the case and the advice given.”
In its grounds for judicial review [3], Innsworth argued last June that the return it was set to receive was not commensurate with the risk it took, while the Access to Justice Foundation could net a “windfall” of £30m or more in unclaimed damages.
The written ruling granting permission has not yet been published.
Meanwhile, those acting for merchants have welcomed this week’s CAT decision. The next stage is a trial next year on whether the card companies can justify the charges.
Cian Mansfield, London managing partner of US class action firm Scott+Scott – which has one group of merchants, with City firm Stephenson Harwood the other – said: “We are delighted that our clients have succeeded in defeating Visa and Mastercard’s opportunistic pass-on defence. This is a great judgment for the European and UK retail and hospitality industries as well as any other merchants who accept payment cards.”