When the Consumer Rights Act came into force in 2015, one man was keeping a keen eye on businesses failing to serve their customers properly. So when Mastercard didn’t respond to a ruling from the European commission that it was profiting unfairly on transaction fees, the “lack of contrition” propelled him into action.
Joining forces with the largest law firm in the world devoted solely to business litigation, Walter Merricks decided to take on the biggest class action in British history, believing millions of consumers had paid higher prices in shops for 16 years because of allegedly excessive transaction fees. “I thought, ‘Right. You’re on’,” the former financial ombudsman told the Observer. “Let’s make this go.”
Last week Merricks’s ambition was vindicated when the court of appeal ruled in his favour, meaning the Competition Appeal Tribunal, which had previously thrown out his claim, will have to reconsider it. The £14bn claim is enormous – and could net about £300 each for 46.2 million adults in the UK.
Many might have been daunted by the scale of the challenge, but not Merricks. “I was nervous, of course,” he said. “You’re always nervous in a court case. But I have lots of energy and I have a lot of different things going on. There’s a long way to go yet.”
Merricks has had a career of remarkable firsts: in 1972, he was appointed the founding director of the UK’s first publicly funded law centre; he was instrumental in changing the law to bring in the Police and Criminal Evidence Act 1984 and in establishing the Crown Prosecution Service in 1985. As a member of the fraud trials committee, his landmark report led to the conception of the Serious Fraud Office in 1987. But perhaps his proudest achievement remains the Financial Ombudsman Service, of which he was appointed its inaugural chief in 1999. During his 10 years there, he presided over more than five million public investigations and resolved more than 750,000 disputes worth tens of millions of pounds.
Now 73, he plays tennis several times a week and is chair of the independent media monitor Impress and the legal reform charity Justice. He serves on the Civil Aviation Authority’s consumer panel and is co-founder of the Donor Conception Network. And, of course, he has the small matter of the Mastercard claim to fight on behalf of the British public.
In 2007, the European commission ruled that Visa and Mastercard had breached competition law by inflating charges on card transactions. Visa accepted the decision and, in one case in 2016, settled a £1.2bn claim made by Tesco out of court.
But between 1992 and 2008, it is alleged that Mastercard imposed unlawful fees on transactions, which were then passed on to consumers via higher retail prices. Merricks calculated the total value of commerce in the UK in those 16 years and then worked out the difference, plus interest, had Mastercard been operating its scheme as instructed by the European commission. As one of the nation’s foremost champions of consumer rights, he is aghast at the injustice. “It is wrong, it is simply wrong,” he says. “If we don’t stop it, it will turn into an invisible tax and Mastercard will keep pushing it up and up. Down the line, consumers won’t notice this tiny amount on each purchase and will simply pay it. Mastercard are not saying they haven’t done anything wrong, because they can’t. It’s shameless really.”
Merricks has a formidable reputation, one he plays down, saying instead he’s been “very lucky” in his career and “on the legal scene for a long time”. He is scathing of companies trying to break competition laws to cheat consumers, and expects the Mastercard case will have a domino effect. “I would be surprised if businesses weren’t talking to their competition advisers this week and being told to keep absolutely squeaky clean. Had we not won in the court of appeal, I think the collective class-action regime would have been dead in the water as well.”
He has spent considerable time battling businesses collaborating to fix prices and breach competition laws. He cites the construction industry as one of the worst offenders and emphasises the impact on consumers. “If, for instance, cement manufacturers were to collaborate, they would do a damage that will ultimately fall on consumers. It will trickle down so people would have to pay higher prices doing repairs to their house.”
In Merricks’s view, the judicial system fails its citizens. “Many lawyers think the system they work in is wonderful, that it’s the greatest in the world, that English justice has bestowed its benefits on so many other countries, and it’s the place to do business and all of that. But, for ordinary people, the English legal system is dreadful.”
Having worked on housing, benefits and immigration cases – “the bulk of where legal issues arise in this country” – and seen first hand the impact on those without fair and proper legal access, Merricks believes “we have a legal system not built for ordinary people”.
As for what happens next with Mastercard, he is simply waiting. It is expected the company, which has a stock market valuation of £190bn, might offer a settlement rather than drag the case out for another four or five years. Merricks’s action was originally funded by American litigation funder Gerchen Keller Capital, which provided £36m of upfront costs with a view to recouping 30% of the proceeds of the case, estimated at around £1bn. It is now being backed by Innsworth Litigation Funding, which has taken on the gamble. Should Merricks win, the right to compensation will be advertised to everyone eligible to apply for a claim. Once the deadline has passed, the court will decide how much Innsworth’s stake will be worth.
“I’m in it for a fair outcome,” says Merricks. “If Mastercard do come up with a sensible settlement, I will certainly consider it. I want consumers to be properly compensated. I don’t want this case to go on longer than it needs to.”
CV: Walter Merricks
1964 Aged 18, Merricks joined Voluntary Service Overseas as an English teacher at Sadiq public school in Bahawalpur, Pakistan.
1967 Graduated from Trinity College, Oxford, where he read law.
1972 Appointed the inaugural director of Camden Community Law Centre, the UK’s first publicly funded law centre.
1975 Law lecturer, Brunel University.
1978 Member of the Royal Commission on Criminal Procedure; his work led to the enactment of the Police and Criminal Evidence Act 1984, and the creation of the Crown Prosecution Service in 1986.
1984 Appointed a member of the Fraud Trials Committee. Its 1986 report led to the establishment of the Serious Fraud Office.
1999 Appointed inaugural chief of the Financial Ombudsman Service.
2001-04 Chair of the British and Irish Ombudsman Association.
2012-17 Commissioner of the Gambling Commission.
2014-19 Chair of the board of Impress, the independent press regulator.