Lawsuit could benefit 46 million people even if they have never owned the credit card

Almost every adult in the UK could receive a payout of up to £300 from Mastercard after a court ruling paved the way for a £14bn class action lawsuit.

The legal action taken by former financial ombudsman Walter Merricks claims that 46 million UK consumers paid higher prices in shops over a 16-year period because of allegedly excessive transaction fees charged by Mastercard.

Two years ago, the Competition Appeal Tribunal threw out Merricks’s claim, ruling it would not grant an order for the case to continue to trial. In a dramatic turnaround, the court of appeal has ordered the tribunal to reconsider what has become the biggest class action in British legal history.

Merricks said he was confident the tribunal will certify the action, enabling it to go to court and result in a multibillion-pound payout, if successful.

“I am very pleased with today’s decision,” said Merricks. “It is nearly 12 years since Mastercard was clearly told that they had broken the law by imposing excessive card transaction charges, damaging consumers over a prolonged period.

“When challenged, all they have done is to raise technical legal arguments that turn out to have no merit – as the court of appeal has shown today. It’s now time for Mastercard to admit the damage they did, to apologise to the British public, and to agree to pay the compensation they owe.”

Mastercard said it will fight the case all the way to the supreme court, if necessary. It said in a statement: “This decision is not a final ruling and the proposed claim is not approved to move forward, rather the court has simply said a re-hearing on certain issues should happen.

“Mastercard continues to disagree fundamentally with the basis of the claim and we believe UK consumers receive real value from the security, convenience and consumer protection of our payment services.”

The tribunal originally rejected Merricks’s claim partly because it could not find clear evidence about how the Mastercard fees had been passed on to consumers – or absorbed by retailers – and how individual losses could be calculated. But the court of appeal found that was not a basis for rejecting certification for a court action.

Merricks said the maximum payout would be about £300 for anyone who can prove they were in the UK in the 16 years between 1992 and 2008.

In total, Merricks said 46 million adults could qualify and they need never have held a Mastercard. His case rests on the fact that higher prices would have been paid by all consumers during the period.

The case is the first major test of a regime introduced under the Consumer Rights Act for people to recover losses from competition law infringements.

Under the regime, UK-based members of a defined group are automatically bound into legal action unless they opt out, with the Competition Appeal Tribunal nominated to oversee such class action lawsuits.

Lawyers acting for Merricks hailed the ruling as a landmark judgment. Boris Bronfentrinker of Quinn Emanuel Urquhart and Sullivan said: “The court of appeal’s judgment marks a significant day for the collective action regime in this country, after a number of false starts before the Competition Appeal Tribunal.”

The case also represents a potential bonanza for new-style litigation funds that pay for class actions to be mounted.

Merricks’s action was initially financed by Chicago-based litigation funder Gerchen Keller Capital, which the Law Society Gazette said would make whatever was the greater of £135m or 30% of the proceeds of the case up to £1bn, plus 20% of the proceeds over £1bn.

A new funder, Innsworth Litigation Funding, has taken on the case. It is understood it will receive a share of whatever is left if not every person in the class action lawsuit makes a claim.

Merricks said he does not personally stand to make a cut from any court award. “I am paid an hourly rate of £150 for the time I have spent on this,” he said.