In depth: Mastercard - how will the £200m be distributed?

Millions of Britons are being invited to sign up online to receive free money. It is not a scam. The website www.mastercardconsumerclaim.co.uk is a scrupulous attempt to distribute fairly the class members’ share of the £200m settlement achieved in the Merricks v Mastercard collective proceedings after eight years of bitterly fought litigation.

Of the £200m agreed settlement, half is ringfenced for paying out to class members (pretty well everyone who bought goods in the UK between 1992 and 2008). How much each will collect is unknown. The website dangles a figure of ‘between £45 and £70’, though in theory it could go as low as £2.50. It all depends on how many sign up. And because of the unprecedented scale of the claim – potentially 44 million class members – that is simply unknown. The higher the expected payment, the more people will sign up; but the more who sign up, the lower the payment.

Yet the outcome of this lucky dip could influence a growing controversy over collective redress and the role of third-party litigation funding in the UK.

This week, the Competition Appeal Tribunal’s 80-page judgment approving the settlement has a stab at predicting what will happen. The judgment cites an estimate by international specialist firm Epiq Class Action & Claims, which has been retained to manage the distribution, that 5% of the potential class – 2.2 million people – would take up an offer if they thought they would get more than £4.50. This would lead to a payment of £45. ‘However, there would need to be flexibility in the advertised amount, making clear that the amount could be lower (if a much greater number seek to claim) or higher (if much less than 5% should claim).’ In the event of less than 5% coming forward, ‘to prevent excessive individual recovery’ payments will be capped at £70 per head. (Epiq is charging £2.9m in the event of a 5% take-up.)

‘It has been a privilege to end my career breaking new ground and leading the way in ensuring that the class action regime introduced in the Consumer Rights Act 2015 can be shown to work effectively’

Walter Merricks, CBE

Another figure is based on an opinion survey conducted by Portland Communications for the settling parties. Although ‘impressively structured’, the results ‘serve to highlight the degree of uncertainty as to the proportion of the class that would claim’, the judgment states. If class members were told that the individual recovery was likely to be £45, though it could be as low as £2.50, ‘then it is plausible that around 10% would claim’. This would add up to £22.50 per head.

Meanwhile, another litigation comms outfit, Thorndon Partners, published what it says is the first nationally representative polling and analysis of collective settlement take-up rates. It notes that a 2019 study by the US Federal Trade Commission found that on average, only 4% of eligible class members submitted claims. It also identifies several potential barriers to take-up, including a reluctance to share personal details. While 63% of respondents would like to be paid by bank transfer, only 23% are happy to reveal their account details.

With the right messaging, however, take-up may be higher than these surveys suggest. One indicator is rail-delay compensation: in 2023, nearly half (47%) of eligible passengers bothered to submit a claim. If the same proportion went for the Mastercard compensation, the individual payout would be £4.76.

Whether that is a good look is another matter. It is not hard to imagine the headline – ‘Lawyers get £100m, you get £4.70’ – playing into the political debate about litigation funding. And when the Thorndon research asked ‘Who do you think benefits the most from settlements?’ 34% of respondents said the lawyers who make the claim. Only 29% said ‘people affected by the issue’.

In a statement this week, class representative Walter Merricks CBE said: ‘It has been a privilege to end my career breaking new ground and leading the way in ensuring that the class action regime introduced in the Consumer Rights Act 2015 can be shown to work effectively – even in a case like mine where the compensation obtained is far less than claimed at the outset.’

Funder Innsworth Capital was less content. Noting that the judgment ‘may have far-reaching implications for class actions in the UK’, it said: ‘We do not think it is a reasonable division of the proceeds, or one that will do anything to encourage investors to fund other opt-out collective actions in the future.

‘We are therefore considering of all of our options, including asking the courts to look again at this matter.’