A London court has approved a settlement in a long-running class action lawsuit against Mastercard (NYSE:MA) over its interchange fees. The dispute, which began in 2016, alleged that nearly 60 million consumers in the United Kingdom were overcharged due to fees imposed on retailers, which were then passed on to customers through increased prices. The lawsuit, led by consumer advocate Walter Merricks, sought compensation for these alleged overcharges.
Previous reports on the case suggested that the lawsuit was initially valued at around £10 billion ($12.6 billion), but the final settlement amount reached only £200 million ($253 million). This marks a significant reduction from the original claim. Over the years, Mastercard has consistently defended its fee structure, arguing that its payment systems provide benefits to both consumers and merchants. The dispute has been one of the most high-profile cases regarding interchange fees in the UK.
How Did the Court Rule on the Settlement?
The Competition Appeal Tribunal ruled in favor of the settlement, dismissing objections raised by litigation funder Innsworth Advisors. Innsworth had challenged the agreement, claiming it undervalued the claim, given that the company had spent over £45 million ($57 million) financing the legal proceedings. Despite Innsworth’s objections, the court approved the deal, noting that the settlement details still require finalization.
Why Was the Settlement Controversial?
The settlement attracted criticism from Innsworth Capital, which argued that the payout did not fairly reflect the resources invested in the case. Innsworth is set to receive reimbursement for its legal costs, along with an additional £55 million ($70 million) from the settlement. However, it contended that this amount was inadequate in comparison to its financial commitment to the lawsuit.
“I am very pleased that after nearly nine years of litigation with Mastercard, I have agreed to a settlement that I believe will deliver meaningful compensation to class members who choose to come forward to participate in the distribution of the damages,” said Walter Merricks when the settlement was announced in December.
“We are pleased to have reached an agreement in principle to put this case behind us,” a Mastercard spokesperson stated at the time.
The lawsuit centered on claims that Mastercard’s interchange fees placed an unfair financial burden on consumers. While the company maintained that its payment system offered advantages, the case underscored broader concerns about credit card fee structures and their impact on retail pricing. The ruling also raises questions about the viability of class action funding in the UK, as litigation funders rely on substantial returns to justify their investments in legal battles.
The approval of the settlement brings a close to nearly a decade of legal proceedings. However, it highlights ongoing debates about corporate fee policies, consumer rights, and the role of litigation funding in large-scale lawsuits. Consumers who are eligible for compensation as part of the settlement will need to follow the distribution process to claim their share. This case also serves as a precedent for future class action lawsuits involving financial institutions and the regulation of interchange fees.
