Nice problems to have: Merricks v Mastercard and the mechanics of large group actions
Merricks -v- Mastercard has been given the green light, heralding a new age for UK class actions. But if Merricks wins, somebody will have to distribute billions of pounds in damages to tens of millions of people. How is that possible? FinLegal's Steve Shinn has the solution
It is official: the UK Competition Appeal Tribunal (CAT) has agreed to hear Merricks -v- Mastercard, a lawsuit that is set to be Britain's biggest-ever class action lawsuit.
The new news is that, on August 18, the CAT formally 'certified' the case. That means it has agreed to hear it. It hasn't set a date but, unless there is a settlement, it is fair to assume that there will be a hearing and a judgment.
The case is being brought by former financial ombudsman Walter Merricks. He claims that Mastercard's interchange fees, charged to retailers for card use and often passed on to customers in increased prices, broke EU law.
He's claiming around £10 billion on behalf of all individuals aged 16 or over who bought goods and services from a UK business that accepted Mastercard between 1992 and 2008. That's around 46 million people. The UK adult population is around 55 million. To put it in further perspective, to date around 43 million people in the UK have been fully vaccinated against Covid.
And if Merricks wins, Merricks' representatives will be given the daunting job of contacting all of them, checking their identities, working out how much they are owed, and paying them out, while weeding out fraudulent claims.
They will also have to satisfy the courts and Mastercard's lawyers that it is all being done correctly.
And it will all probably have to be set up and managed by a firm of solicitors.
It is an inevitable problem that will come with all successful group actions. How do you go about doing it? It's not something that gets taught on the LPC.
The traditional way of distributing the damages is to advertise and set up a call centre. Call handlers then take the details of potential claimants, ask them to email or send in documents, check them out, and pass on successful claims to be processed by a finance function.
This is a major, and costly, operation. But a necessary one, as distributing damages is, of course, the ultimate objective of a group action lawsuit.
The good news is that it really doesn't have to be this hard. FinLegal has a solution that can make this process much less time consuming, much easier to manage, and much more cost effective
Management by exception
Our class action claims automation platform has been designed to handle situations such as this.
We tailor the portal for each lawsuit. Potential claimants then access the platform via a web site. Once logged in, their whole experience will be automated.
The software asks them questions, gets data from them, and processes it, using artificial intelligence. In most cases, the software will be able to guide a claimant from onboarding to payment.
However, if there are any problems or ambiguities, the software will flag them to a human claims manager, who will take over.
I call this process 'management by exception' because human management is only needed in exceptional cases.
Using the call centre model, human management is needed in all cases. That means at least 25 minutes of human interaction per claim. If there are millions of claimants, you are going to need a rather large call centre filled with claims handlers.
The costs of the call centre alone are likely to be many times more than the legal fees.
Using the management-by-exception software model, around three quarters of the claims will go through without the need for any human help. That reduces call centre costs by 75%.
Meaning that, for the law firm running the case, cost-per-claim will drop dramatically.
Access to justice
The economic case is clear. There is also an access to justice case for using the software: it makes group actions more viable.
To be clear: the cost of the call centre won't be paid for by the lawyers. It will come out of the damages pot, reducing the amount of money available to claimants.
Anybody who has been following the judgements in Merricks as it has gone from the CAT to the Supreme Court will be aware that the judges are keen to ensure that any group action that gets certified is viable.
They are very keen to ensure that the purpose of the case is to compensate claimants, not enrich lawyers. A case that is so expensive to run that it leaves claimants with very little left may not get certified.
Reducing the cost-per-claim will mean more cases happen because more cases become economically viable.
And increasingly lawyers are competing for claims with the CAT deciding which firm of lawyers is best placed to run the case.
The firm that can combine the strongest legal arguments with the lowest costs is likely to be the one that wins out in the end.
In short, the management by exception model makes financial sense for law firms running the case, benefits claimants, and makes more cases viable. There is no reason that I can think of not to use it.