Walter Merricks CBE launched his class action against Mastercard in 2016. The claim was brought on behalf of a class of around 44 million people – anyone who purchased goods or services from any business accepting Mastercard payments between 1992 and 2008. Mr Merricks brought these (purely follow-on) proceedings on the back of a European Commission decision which found Mastercard’s European interchange credit card fees (MIFs) breached competition laws. 

The Competition Appeal Tribunal (the Tribunal) initially refused to certify the claim as “suitable” for the regime. However, following reviews by the Court of Appeal in 2019 and the Supreme Court in 2020, and a remittal hearing before the Tribunal in 2021, Mr Merricks eventually successfully obtained a collective proceedings order (CPO), albeit for a somewhat-reduced claim, worth approximately 65% of the original claim value (i.e. circa £9-10bn). 

Approximately four years after the start of the substantive proceedings, and after many preliminary issue hearings, Mr Merricks and Mastercard agreed to settle the claim for £200m and signed a settlement agreement on 3 December 2024. However, under the UK collective proceedings regime, settlements agreed between parties to opt-out collective proceedings must be approved by the Tribunal in the form of a collective settlement approval order (CSAO) before they bind the class members. A hearing took place before the Tribunal in January 2025, very shortly before a hearing concerning pass-on was due to commence before the Tribunal. As such, there was significant urgency for the settlement approval hearing to take place.

Despite the fact that the settlement reached in these proceedings was under 1.5% of the value of the claim originally advanced, the Tribunal ultimately approved the settlement at the January hearing. However, the judgment setting out the reasoning behind the Tribunal's decision that the settlement was “just and reasonable” was not handed down until May 2025.

Given this is by far the biggest settlement reached in collective proceedings to date, and only the fifth settlement reached under the regime so far, the commentary provided by the Tribunal in this case amounts to important guidance for stakeholders in other collective actions. We have therefore explored some of the key points of interest in the judgment and the settlement and distribution mechanics below. 

Key Points of Interest in the Judgment

Challenge by funders

Aside from its size, this settlement has made headlines because the class representative’s funder expressed significant discontent with it. The funder, Innsworth Capital Ltd (Innsworth), intervened in the CSAO hearing challenging the approval of the settlement – arguing before the Tribunal that the agreement significantly undervalued the claim and failed sufficiently to compensate the class. It was also concerned about its own return given the low settlement amount. The total return expected by Innsworth under the litigation funding agreement was over £520m, which also provided for a so-called “agreed minimum return” of £179m. 

The Tribunal did not accept the funder’s position. It is perhaps interesting to note that the Tribunal did not agree with Innsworth’s interpretation that the statutory test requiring collective settlements to be “just and reasonable” meant just and reasonable to all stakeholders involved, including the funder. Instead, the Tribunal stated that the focus of this test was on whether the settlement was just and reasonable from the perspective of the class members. The Tribunal considered the history of the case in some detail and agreed with the arguments of the settling parties, confirming that it was “entirely satisfied” that the terms of the settlement were just and reasonable. This was not least given a judgment handed down in early 2024 in relation to a preliminary issue primarily concerning causation arguments, in which the Tribunal found that “over 90% of the claim failed factually”, thereby reducing the realistic claim value from circa £10bn to, at a maximum, circa £1bn. 

Potential conflict of interest

In addition to contesting the CSAO at the January hearing, Innsworth initiated arbitration proceedings for unquantified damages personally against Mr Merricks pursuant to the litigation funding agreement. Somewhat unusually, in light of the threat from Innsworth to sue Mr Merricks, Mastercard agreed to provide an indemnity to Mr Merricks of £10m to cover any contractual exposure that he would face for accepting the settlement offer. The Tribunal considered that this indemnity put Mr Merricks in a difficult position – it is not clear that Mr Merricks would have accepted the settlement offer without this indemnity (given his personally vulnerable position) – and went on to consider the question of a potential conflict of interest between Mr Merricks and the class members. The Tribunal sympathised with Mr Merricks’ position in this regard, and ultimately concluded that the existence of the personal indemnity did not change their view on the terms of the settlement in the circumstances of the case. 

Differing priorities between stakeholders

In considering the arguments made by Innsworth against the settlement, the Tribunal explored the potential differences in perspective between funders and class representatives. By way of example, the Tribunal explained that a funder might wish to continue a case with a 30% chance of achieving a £500m return rather than settling for £200m, given its broader portfolio of cases, but a class representative might wish to settle the same case, even if there was only a small chance that it would fail, as such failure would result in class members receiving nothing at all. 

Settlement mechanics and distribution plan 

The distribution plan proposed by the settling parties saw the £200m settlement amount split into three pots: 

• Pot 1: £100m ringfenced for the class members, with the amount for each class member to be determined by the number of class members that come forward to collect their damages entitlement, subject to a cap (proposed to be £70 per person by Mr Merricks and £45 per person by Mastercard);
• Pot 2: £45,567,946.28 ringfenced to provide Innsworth with 100% recovery of all costs, fees and disbursements paid by it to the end of November 2024 plus anticipated costs; and 
• Pot 3: the use of the remaining sum of £54,432,053.72 was left to the discretion of the Tribunal, with the settling parties suggesting it could be used to (i) give Innsworth its return; (ii) top up any shortfall in Pot 1; or (iii) pay non-participating class members via a charity. 

The Tribunal confirmed that, in its view, it was implicit in the Competition Appeal Tribunal Rules 2015 that it is not only the terms of the settlement but also the distribution of the settlement that requires its approval, so it proceeded to analyse and set out its views on these proposed arrangements. Although still splitting the damages into three pots, the Tribunal exercised its discretion when approaching distribution (particularly for Pot 3): 

• Pot 1: The Tribunal largely followed the settling parties’ proposal for £100m to be distributed to the eligible class members that come forward. Should all 44 million class members collect their damages, each class member will receive circa £2.20. However, typically, not all class members do come forward in such claims (indeed the settling parties calculated the £45 sum on the basis that circa 5% of the 44 million class members come forward). In the event that fewer than 5% of the class members claim their damages, the Tribunal applied a cap on the total damages any one class member can receive of £70 (i.e. following the proposed cap suggested by Mr Merricks), and in the event that more than 5% of the class members come forward, there is scope for this pot to be topped up to an extent by Pot 3 (see further below);
• Pot 2: The Tribunal also largely followed the settling parties’ proposal as regards the incurred and anticipated costs that make up Pot 2. The Tribunal approved the recovery of all costs incurred by Innsworth on behalf of the class representative (circa £40.7m) but required that some of the other costs to be paid from this pot (namely costs incurred by Innsworth on its own behalf (circa £450,000) and anticipated costs (circa £4.4 - 5.7m)) be referred for independent assessment as to their reasonableness before approval. The total value of Pot 2 was not stated in the judgment, although it is expected to be circa £45.5m; 
• Pot 3: The Tribunal expressed that Pot 3, comprising the remainder of the £200m settlement anticipated to be (circa £54.5m), should be used for: 

a. Innsworth’s profit at a level that was not excessive. When deciding the level of the profit return, the Tribunal considered (i) Innsworth’s funding of the proceedings prior to the proposed settlement and the risks involved with providing such funding, (ii) the “success” of settlement reached, and (iii) case law from overseas jurisdictions including Australia and Canada. The Tribunal concluded that a return on investment of x1.5 was appropriate – on the assumption that the costs and expenses incurred by Innsworth would amount to circa £45.5m (covered by Pot 2), the total return for Innsworth would be approximately £68m (with the profit element of circa £22.5m coming from Pot 3); 

b. other costs including the costs of a specific documents application made by Mr Merricks, the fees of the independent costs assessor and Mr Merricks’ solicitors’ costs of participating in the independent assessment process, and the costs of any appeal of the Tribunal’s judgment; and

c. to the extent that sums remain in Pot 3 after the above monies have been paid, the Tribunal determined that such sums should first be used to supplement Pot 1 in the event that more than 5% of eligible class members come forward, such that each class member can receive £45 (or a lesser sum as Pot 3 permits), with the remainder to be paid to the Access to Justice Foundation charity proposed by the class representative.

A significant factor relied upon by the Tribunal when deciding upon Innsworth’s profit return was that in the Tribunal’s view the case achieved “a very poor result” as the settlement sum constituted under 1.5% of the original claim value and a vast sum of money had been spent on the proceedings (meaning that a 1.5 multiple of spend was still a large return). Whilst this judgment therefore does not mean that the Tribunal in other settlements will award a similar level of return to funders, it highlights the risk of putting forward figures which may turn out to be an overestimate of the claim value at the certification stage.

Judicial review application

Innsworth remains unhappy about the outcome of this case and has brought an application for judicial review of the decision to issue a CSAO (as Innsworth was not a party to the CSAO application, it cannot appeal the judgment). Despite its comments during the hearing, Innsworth is not expressly challenging the “very low” value of the settlement in its application for judicial review. Instead it has brought its judicial review application alleging that: 

a. in applying the Australian case of Street v State of Western Australia [2024] FCA 1368, the Tribunal conflated the return on investment (which Innsworth considers to be the profit to be earned by a funder) with the concept of a multiple of invested capital (which it considers to be the total amount to be returned to the funder including recovery of the capital spent). As the Tribunal expressly noted that it was awarding Innsworth a return on investment of x1.5, Innsworth argues that it should be paid circa £68m as a profit element on top of the return of its costs of circa £45.5m; and 

b. the Access to Justice Foundation (which Innsworth estimates could receive more than £30m from Pot 3) should not stand to gain more by way of windfall of the net proceeds than Innsworth (who currently stand to receive a circa £22.5m profit), in circumstances where it was Innsworth who took all the financial risks. 

What does this judgment mean for the future of collective settlements?

In light of Innsworth’s application for judicial review, these collective proceedings are still far from over and it is likely to be some time before eligible class members are able to come forward to collect their damages. Nevertheless, if the Tribunal’s judgment stands, the return awarded to the funder in this case, and the Tribunal’s willingness to pay funds to charity at the expense of that return, will be carefully assessed by other funders of collective proceedings and those considering funding future proceedings. 

That said, it is also worth noting that other recent judgments have been more positive for funders in 2025, particularly the Court of Appeal’s judgments in Gutmann v Apple (which allowed for funders to be paid ahead of class members – read our article on this judgment) and Sony v Neill (which confirmed that litigation funding agreements in which the funder’s return is calculated as a multiple of the funder’s expenditure on the proceedings are not damages-based agreements and are therefore enforceable – read our article on this judgment).

It is worth stressing that these proceedings are unique, and the judgment highlights on a number of occasions that the Tribunal focused on the particular circumstances of this case (including the urgency to make a decision ahead of imminent future hearings in the case) when reaching its decision on the reasonableness of the settlement. The overriding takeaway of the judgment, which is not altogether surprising, is that the Tribunal considers the interests of the class members to be paramount in the UK’s collective proceedings regime and that other stakeholders’ interests will always be a secondary consideration.