Economist ’ s Note Economic Analysis in Damages Actions — Insights from Recent Proceedings in the UK

The Consumer Rights Act 2015 (CRA) introduced a new collective action regime to the competition law landscape in the UK, including the ability to bring opt-out actions. The defining feature of a collective action is that the Competition Appeal Tribunal (CAT) can consider a collection of individual claims together rather than considering all aspects of every individual claim separately. The UK’s collective action regime aims to facilitate redress for claims that might not otherwise be brought, while avoiding aspects of the US class-action regime. The fact that it can accommodate both opt-in and opt-out claims means it represents a potentially dramatic change in the competition law landscape. Opt-out claims introduce new opportunities for redress for potential claimants and may markedly change the risks and exposure of defendants in cases taken in the UK. Moreover, other member states are likely to draw lessons from the experience and, while the European Commission recommended that member states have collective redress systems by 2015, its recommendation was that they should, as a general rule, be based on the ‘opt-in’ principle. The development of the UK’s new regime has therefore potentially very significant ramifications for the approach across Europe. Two cases have so far reached the stage where the CAT has been asked to certify whether the matter can proceed to trial on a collective basis, Mobility Scooters and the MasterCard consumer case. This article first reviews the core legal test described by the CAT for class certification and then considers the key economic issues at the heart of these cases. The cases relate to two very different types of infringement. Mobility Scooters was a claim following an OFT infringement decision that manufacturer Pride had entered into vertical arrangements with eight of its UKwide online retailers which had as their object the prevention, restriction or distortion of competition in the market for mobility scooters by ‘prohibiting the advertising of below RRP prices online in respect of certain Pride mobility scooters between February 2010 and February 2012.’ In the MasterCard consumer case, the claim relates to a finding by the European Commission that the defendant acted unlawfully and in breach of Article 101 TFEU in establishing and implementing certain fees known as Multilateral Interchange Fees (MIFs), which retailers were required to pay on credit and debit card transactions.


I. Introduction
The Consumer Rights Act 2015 (CRA) introduced a new collective action regime to the competition law landscape in the UK, including the ability to bring opt-out actions. 1 The defining feature of a collective action is that the Competition Appeal Tribunal (CAT) can consider a collection of individual claims together rather than considering all aspects of every individual claim separately.
The UK's collective action regime aims to facilitate redress for claims that might not otherwise be brought, while avoiding aspects of the US class-action regime.The fact that it can accommodate both opt-in and opt-out claims means it represents a potentially dramatic change in the competition law landscape.Opt-out claims introduce new opportunities for redress for potential claimants and may markedly change the risks and exposure of defendants in cases taken in the UK.Moreover, other member states are likely to draw lessons from the experience and, while the European Commission recommended that member states have collective redress systems by 2015, its recommendation was that they should, as a general rule, be based on the 'opt-in' principle. 2The development of the UK's new regime has therefore potentially very significant ramifications for the approach across Europe.
Two cases have so far reached the stage where the CAT has been asked to certify whether the matter can proceed to trial on a collective basis, Mobility Scooters 3 and the MasterCard 4 consumer case.
This article first reviews the core legal test described by the CAT for class certification and then considers the key economic issues at the heart of these cases.The cases relate to two very different types of infringement.
Mobility Scooters was a claim following an OFT 5 infringement decision that manufacturer Pride had entered into vertical arrangements with eight of its UKwide online retailers which had as their object the prevention, restriction or distortion of competition in the market for mobility scooters by 6 'prohibiting the advertising of below RRP prices online in respect of certain Pride mobility scooters between February 2010 and February 2012.'  In the MasterCard consumer case, the claim relates to a finding by the European Commission that the defendant acted unlawfully and in breach of Article 101 TFEU in establishing and implementing certain fees known as Multilateral Interchange Fees (MIFs), which retailers were required to pay on credit and debit card transactions.
• The MasterCard consumer action highlights the challenge in taking a 'top-down' approach (estimating aggregate damages and only subsequently considering how to distribute that amount across individuals) and also the role of individual issues in collective actions.
• Retailers' claims in MasterCard make clear the need for courts to pay careful attention to economic analysis, notably in the context of complex settings such as two-sided markets and in deriving counterfactual scenarios.
In addition to the consumer claim, the CAT considered whether an individual retailer suffered damages in Sainsbury's v. MasterCard, and in the judgement by Justice Popplewell, the High Court addressed at least 12 other claims brought by retailers. 7The consumer claim argues that the MIF was passed on by businesses to all 46.2 million individuals who purchased goods and/or services from UK businesses that accepted MasterCard.

A. Eligibility for a CPO
To issue a Collective Proceedings Order (CPO), 8 the CAT must be satisfied that there is some basis in fact 9 which establishes that three individual certification requirements are met, namely: 10 (i) The claims must be brought on behalf of an identifiable class of persons (ii) The claims must raise 'common issues' (iii) The claims must be 'suitable' to be brought in collective proceedings The CAT describes the first requirement thus: (i) it must be possible to say for any particular person, using an objective definition of the class, whether that person falls within the class; and (ii) that the class should be defined as narrowly as possible without arbitrarily excluding some people entitled to claim. 11ommon issues are defined as the same, similar or related issues of fact or law. 12In other words, claims can be efficiently collected together when the issues the court must decide are common to each of the claims.Although the claims must raise common issues, that does not require that all the significant issues in the claims should be common issues 13 and the final resolution of the claims will often require the assessment of individual issues. 14It is notable that this aspect of the UK threshold for certification is potentially less restrictive to certification than the US class-action system where common issues must also predominate. 15he CAT Rules describe that assessing whether claims are 'suitable' to be brought in collective proceedings can depend on a wide range of factors. 16One aspect is whether the claims are suitable for an aggregate award of damages, 17 including whether such an award can be distributed between members of definable subclasses. 18

B. Rigor and quantification
Using language familiar to US class certification discussions, 19 the CAT has described that its approach to certification 'should be rigorous.' 20In practice, the question is how much rigorous analysis can really be undertaken at the CPO stage when '[t]he approach under the UK regime of collective proceedings is intended to be very different [from the US], with either no or only very limited disclosure and shorter hearings held within months of the claim form being served.' 21There will clearly be tensions between the desire for a rigorous analysis at the CPO stage and the desire to limit pre-CPO disclosure.
More generally, the UK courts have accepted that the quantification of an overcharge always involves estimation, 22 and that difficulties in quantifying compensation are to be dealt with 'by the exercise of a sound

III. Economics in Mobility Scooters
In Mobility Scooters the consumer claim followed an OFT decision that certain vertical agreements infringed Chapter 1 of the Competition Act (1998) since they involved a prohibition on 'below RRP advertising of online prices' (BROPA).Claimants argued26 they were harmed by the infringing agreements because price competition was less intense since retailers did not advertise the lower prices they might have absent the infringement, and that retailers either advertised higher prices or they advertised no prices and directed online purchasers towards telephone sales channels-advising them to 'call for better prices.'

A. Estimating overcharge
The claimants proposed estimating the overcharge by calculating a weighted average price during the infringement period (February 2010-February 2012) and comparing it to a calculated weighted average price from the post-infringement period (March 2012-December 2014).Claimants argued that prices in physical stores fell on average after the infringement period by 16.2 per cent and attributed that fall to the removal of the infringement.They further asserted that the differential between the two distribution channels (physical stores and online) was the same during and after the infringements so that the overcharge to online customers could also be estimated (see Fig. 1).However, the CAT judgement in Mobility Scooters makes clear that evidence of declining prices alone is insufficient.Instead, the claimant must establish that there is a basis for demonstrating that an observed fall in prices is attributable to the end of the infringements and not to other factors, that is, provide evidence of causality.27

B. Common issues
The CAT considered whether any overcharge in Mobility Scooters was a common issue among purchasers.The defendant argued that (i) the loss suffered by each customer would depend on that individual's purchasing and search behaviour and so the damage caused would not be common; and (ii) that any methodology which allowed damages to be estimated on a common basis would require knowledge of whether a given individual did search the market and/or would have searched the market in the counterfactual.
The claimant accepted there was marked price variation across individuals since prices were individually negotiated, but argued that overcharge was nonetheless a common issue.The claimant asserted the extra amount customers paid as a result of the infringing agreements was sufficiently similar to mean overcharge was a common issue, whether or not a given individual paid, say, £1,000 or £750 for the scooter. 28

C. Quantities and subclasses
The most significant element of the quantification argumentation during the CPO application in Mobility Scooters related to quantity not price.The relevant quantity depended on whether any overcharge resulting from the conduct was market-wide, or whether it was limited to at most the customers of the eight retailers with whom infringing agreements were signed. 29he claimants submitted that the BROPA prohibition made it harder for consumers to shop around for the best price, and that the infringing agreements meant the competitive pressure on other retailers was absent while the eight retailers (with collective market share of around 15 per cent of sales) were not insignificant. 30hether the umbrella sales experienced an overcharge was thus a central issue for quantification.This issue also played a role in the CPO application since the CAT was required to define the relevant claimant subclasses in the CPO and subsequently would be required to award any aggregate damages for each subclass.
The parties agreed to distinguish subclasses of customers by (i) sales channel (purchases online (c.25-30 per cent of sales) versus physical stores (c.70-75 per cent of sales)); and (ii) whether or not customers purchased a scooter model that was covered by an infringing agreement. 31The CAT did not, however, believe these four subclasses alone could sustain an aggregate damages award since it did 32 'not find those subclasses and what is within them sufficiently common.'The CAT was concerned that a different quantum of damage may be due to those who purchased directly from the eight retailers and those whose purchases constituted umbrella sales from other retailers.The application for a CPO was thus rejected, although with the possibility that a revised CPO application could be made by the claimants.Instead the claimants dropped their application for a CPO. 33

IV. Economics in MasterCard
The CAT provided its judgement for the CPO application in the MasterCard consumer claim in July 2017.Before considering the consumer claim directly, for background it is useful to first consider the related claims by retailers against MasterCard.This section first considers the economic issues in these cases before turning to the particular challenges for economic analysis in the MasterCard consumer claim.

A. Overcharge in Sainsbury's
Sainsbury's 34 claimed damages were due for the breach of Chapter 1 of CA98 and/or Article 101 TFEU by reason of the level at which the UK Multilateral Interchange Fee, or MIF, 35 was set for MasterCard fees. 36The CAT agreed and awarded Sainsbury's £68.6 million in damages (plus interest).
The hypothetical example in Figure 2 below briefly illustrates how MIFs in payment card schemes work.Suppose the MIF is 0.7 per cent and the Acquirer Fee is 30 If somewhere in the region of 27,000-32,000 people were subject to an overcharge, this much larger base of customers would lead to a markedly higher (but still not enormous) damages estimate, even if the average overcharge were lower.If the overcharge were £95 then the aggregate damages at the low end of the range would be 27,000*£95 = £2.6 mil, while if the overcharge were £135, a higher indicative estimate would be 30,000*£135 = £4.1 mil.0.1 per cent.If the cardholder buys an item for £10, the issuing bank will retain 7p and the acquiring bank receives £9.93, keeps 1p, and the merchant receives £9.92.When MasterCard sets the UK MIF, the CAT finds that it 37 'would naturally accord greater weight to the interests of issuing banks than to the interests of acquiring banks,' and that issuing banks would prefer a higher UK MIF ceteris paribus.Indeed, issuing banks have no incentive to engage in bilateral bargaining in the factual -they can walk away from any such negotiation and choose to accept the default MIF.
In the CAT's counterfactual, issuing banks would no longer have a guaranteed default UK MIF and instead Interchange Fees (IFs) would have to be set through bilateral negotiations between issuing and acquiring banks.No UK MIF necessarily means issuing banks would have a worse outside option than in the factual.However, in other respects, the CAT's analysis of relative bargaining position is unchanged.In particular, the CAT's analysis suggests that (i) issuing banks have relatively good outside options (since they do not have to issue MasterCard cards to their customers-they have the option to choose between MasterCard, Visa and perhaps Amex); and (ii) acquiring banks have relatively weaker outside options (since their customers, merchants, must accept payment via all rival systems, rather than just one-or risk losing the merchant sales for no real benefit).This balance in negotiation position should affect the resulting counterfactual price.
It is striking that the CAT adopts a cost benchmark (derived from a 2005 cost study of issuing banks 38 ) in order to determine the 'but-for' price-the bilaterally negotiated interchange fee.Economics, on the other hand, suggests that a party (here an issuing bank) would get beaten down in price in bilateral negotiations to its cost only when the other side of the negotiation (here the acquiring bank) had all of the negotiating power.In short, there is marked tension between the thrust of the CAT's analysis of relative bargaining position and its choice to adopt an issuing bank's cost measure as the benchmark for counterfactual competitive prices absent the MIF.

B. Overcharge in Popplewell
A total of 12 further claims against MasterCard were brought before Justice Popplewell in the High Court. 39The counterfactual Justice Popplewell noted that the parties' experts agreed that the CAT's bilateral bargaining counterfactual was not realistic.40 Instead, the parties determined there were two potentially relevant counterfactuals 41 involving the MIF (i) being set equal to zero or (ii) being set equal to the maximum lawful MIF (a positive level less than actual MIF and equal to whatever level the court decides is exemptible under Article 101(3) 42 ).
Justice Popplewell considered whether Visa's MIF should be held at its actual levels in the counterfactual.That might  not be the case, for example, if it were established on the basis of the Commission's infringement decision against MasterCard that Visa's actual MIFs were also unlawful.He decided that the claimants would need to establish that Visa's and MasterCard's schemes were 'materially identical.' 43In contrast, if Visa's MIF was lawful then its actual MIFs should form part of the counterfactual since 'the default position for the realistic counterfactual is the real world, and the court treats conduct as lawful unless and until it is shown to be unlawful.' 44ustice Popplewell thus decided that there would be a differential between Visa and MasterCard MIFs in the counterfactual.Moreover, if MasterCard's counterfactual MIF were zero while Visa's MIF remained at its actual level, he found issuing banks would have both the ability and incentive to switch their choice of payment scheme away from MasterCard 45 towards Visa and so MasterCard's payment card scheme would collapse (and competition from Amex would reinforce the outcome 46 ).It was then a small step to agree with MasterCard that its MIF was justified since it was objectively necessary to the main operation of the MasterCard scheme as a whole.
The question of whether rivals' prices should be fixed in the counterfactual is a general one.Economists tend to consider that the prices charged by large rival firms may be interrelated.If so, it will not always make sense to hold one firm's price fixed (between counterfactual and factual) when finding that another firm's price would become materially lower in the counterfactual than it was in the factual.The challenge is to understand how prices would have adjusted in a new counterfactual equilibrium (in this case, a new equilibrium in a two-sided market setting).

Pricing in two-sided markets
The economic efficiency (or otherwise) of payment card prices is best considered within the framework of two-sided markets.In two-sided markets, the more users there are on one side, the more attractive the platform is to the other side. 47Justice Popplewell's recognition of the economic literature on two-sided markets is both welcome and appropriate.
In two-sided markets, competitive prices reflect the interdependency between customers' demands; they do not necessarily reflect the costs or demands from just one side of the market.For example, competition between newspapers can lead to low or no costs for readers, and fees for advertising.This feature was noted by Justice Popplewell, who described (presumably with the CAT's cost benchmark in mind): 48 'An issuer cost based approach is not supported in any of the academic literature as having any sound theoretical basis.Rysman and Wright 2015 describe it as "not supported by any academic theory" and Tirole as "unfortunately bears little relationship with the theoretically correct level".' Even so, questions remain about whether the judgement successfully integrates the analysis of the various parts of two-sided markets into a coherent whole.For example, the judgement argues that platforms compete to attract issuers, so competition between payment card systems leads to higher interchange fees, 49 yet elsewhere suggests that platforms must compete to attract merchants and would thus need to offer zero interchange fees. 50he challenge in a competition case under Article 101 is to decide the exemptible level of MIF in light of the considerations under 101(1) and also 101(3).Justice Popplewell adopted a theoretically grounded benchmark price and sought to calculate it using the best available (though certainly imperfect) information.The analysis suggests that both exempt and exemptible levels of MIF were higher than actual MIF levels, and Justice Popplewell found that there was therefore no overcharge.49 '[T]he evidence before me from both experts was that the competition between Visa and MasterCard on the inter-system market put upward pressure on interchange fees….The more MasterCard and Visa can persuade issuers to issue their respective cards, the greater MasterCard's and Visa's respective revenue, because the scheme operator's revenue in the form of licencing fees is maximised by maximising system output….
[I]t is in the interests of both Visa and MasterCard when competing with each other to offer higher MIFs to issuers in order to encourage them to issue their own cards.This obviously has some natural upper limit at the point where merchants decline to pay for the benefit of accepting their cards, but within that boundary the inter-system competition puts upward pressure on MIFs.' Paragraph 142(2), Popplewell judgement.50 'I found convincing the views of both experts that individual merchants would be highly likely to be attracted by offers of zero interchange, since they would be at a competitive disadvantage if their competitors did so and they did not.…[I]f one looks at it from the perspective of acquirers, it was the convincing evidence of both experts that as a matter of economic analysis, and on the reasonable assumption that the acquiring market is competitive, competition amongst acquirers would produce the outcome that merchants want, i.e. zero interchange fees.' Paragraphs 142(3) and 143, Popplewell judgement.

C. Pass-on in Sainsbury's
In Sainsbury's, the CAT described that the pass-on 'defence' is in reality not a defence at all-it simply reflects the need to ensure that a claimant is sufficiently compensated, and not overcompensated, by a defendant. 51herefore, the key question relates to the evaluation of the actual extent of the damages suffered by the claimant.
1.The CAT's legal definition of a passed-on cost and the sweet shop example In evaluating the actual extent of the damages in Sainsbury's, the CAT wrote: 52 'We consider that the legal definition of a passed-on cost differs from that of the economist in two respects: (i) First, whereas an economist might well define passon more widely (i.e., to include cost savings and reduced expenditure), the pass-on defence is only concerned with identifiable increases in prices by a firm to its customers (ii) Secondly, the increase in price must be causally connected with the overcharge, and demonstrably so' The CAT appears to risk overstating the tensions between the legal and economic definitions of pass-on.In particular, the ideas that (i) the term pass-on or pass-through can relate only to identifiable price increases by a firm to its customers, and (ii) the price increase should be causal, each seem uncontroversial to economists.For example, in RBB's report for the OFT, the definition of pass-through appears consistent with that approach since (absolute) pass-through is defined as 53 'the degree to which a given absolute change in cost causes a given absolute change in price.'Relative pass-through is defined analogously.The 'sweet shop example' was considered by the CAT to explore whether there were differences between legal and economic pass-on.The CAT supposes that a sweet shop buys sweets at wholesale price w, sells them to children at retail price p, and that there was a cartel which increased the wholesale price of sweets w by, say, 10 per cent.Instead of passing on the higher wholesale price to the children in the form of more expensive sweets, the sweet shop decides to cut back its marketing budget (or reduces its wages).
The CAT posed the question of whether the cost (or wage) reductions are considered 'pass-on' by an economist since they would not conform to its own definition of pass-on.In respect of this example, whether an economist calls it pass-on or something else, this theory connects illegal conduct to redistribute the harm suffered away from the sweet shop owner.In particular: (i) the sweet shop owner takes actions to mitigate damage to the direct claimant-the owner mitigates damages suffered from the illegal conduct; (ii) the mitigation attempts cause damage to the indirect claimants-the owner's actions damage the customers (e.g., via reduced quality of service through fewer staff being available); and (iii) there is an additional potential claimant group if the cartel conduct damaged workers (or the supplier of marketing services).
While the CAT places a heavy burden on such causal chains in Sainsbury's, and it would no doubt be challenging to establish causation in practice, the Damages Directive's Right to full compensation 54 appears to be potentially supportive of such an argument if the chain of causality in fact affected the actual quantum of damage suffered.

The burden of proof
In Sainsbury's, the CAT puts the burden of proof in relation to pass-on firmly on the defendant, describing its approach to pass-on as motivated by a policy aimto reduce risk of under-compensation to claimantswhich it considers at least as great as the risk of overcompensation. 55n particular, the CAT states: 56 den is on the defendant) demonstrates the existence of such a class, we consider that a claimant's recovery of the overcharge incurred by it should not be reduced or defeated on this ground.' For completeness, I note that under a wider scope of definition of pass-on which allowed for marketing or labour costs, this approach would need to be modified but perhaps only to the extent that the defendant would need to show that there exists other classes of claimant, upstream and downstream of the claimant(s) in the action, to whom damage was caused.Under the CAT's policy, the burden would presumably remain on the defendant to demonstrate to the court that the right to full compensation, but not overcompensation, means the damage award should be adjusted.

Evidence for pass-on in Sainsbury's
The CAT examined witness and factual evidence on whether supermarket pricing would have increased in response to an overcharge on interchange fees.It concluded that MasterCard had failed to dispose its burden of proof in relation to the pass-on defence, deciding instead that: 57 '….given the range of products sold by Sainsbury's, and the multitude of costs incurred by Sainsbury's in doing so, it would be impossible to say what part of the price of any given product was attributable to the UK MIF.' Elsewhere in its judgement, however, the CAT also found that there was pass-on in respect of pre-judgement interest.In particular, following Sempra Metals, 58 the claimant should be allowed to recover her actual interest losses, including a loss of compound interest, provided the claim is particularised and proved.The CAT argued: 59 '….because the UK MIF was a cost common to Sainsbury's and its supermarket rivals, we consider that a substantial amount of the UK MIF -50%would have been passed-on (albeit not in a manner which would have amounted to a "defence" of pass-on…).'Thus, the CAT determined that Sainsbury's absorbed 50 per cent of the overcharge itself, and so it suffered damage from lower cash balances in the bank and more borrowing than it would have had absent the infringement.In particular, it awarded interest on damages based on the factual circumstances of Sainsbury's loss, noting that Sainsbury's did not raise any equity during the claim period, and arguing that it was appropriate to award compound interest on 50 per cent of Sainsbury's assessed damages (i.e., the raised costs that were not passed on). 60he CAT's approach in these two aspects appears difficult to entirely comfortably reconcile, but reflects the difference in hurdle faced by defendant and claimant.

D. The MasterCard consumer claim
The judgements by Justice Popplewell and the CAT in Sainsbury's provide important context for the CAT's decision on whether the requirements for class certification were met in the MasterCard consumer claim.In particular, the CAT had to decide whether all of the 46.2 million individual claims raised 'common issues' and were 'suitable' to be brought in collective proceedings.
For the purposes of the consumer claim, the applicant's expert submitted 61 a methodology which attempted to arrive at a top-down estimate of the aggregate damages award calculated globally.The applicant then proposed a simple method for distributing the aggregate damages across individuals in the class.Each aspect of the proposed methodology is discussed in turn.

Determining aggregate damages
The applicant's expert submitted that the aggregate damages could be calculated by a three-step methodology which involved determining: (i) the volume of commerce (VoC) affected; (ii) the overcharge; and (iii) pass-on or pass-through.

i. Volume of commerce
In terms of the VoC, the applicant proposed using public data to calculate the total value of payments made by consumers using MasterCard credit and debit cards to businesses selling in the UK each year during the claims period.Since the MIF, and the alleged overcharge, var- ied across each of four categories of purchases (credit and debit cards; and domestic and cross-border purchases), 62 the CAT noted it would be necessary to calculate VoC for each category of purchase and year.
ii. Overcharge Following the discussion above in relation to Popplewell, in the MasterCard consumer claim the overcharge was alleged to be the difference between the MasterCard UK MIF and the counterfactual IF that would have been charged had there been no infringement, i.e., either no MIF at all or a lower level of MIF which qualified for exemption under Article 101(3) TFEU.The exact construction of the relevant counterfactual IFs would, the CAT notes, 63 'no doubt be a significant issue in the proceedings'-if the application were to succeed.
In each category-year, the applicant's economic experts followed the approach accepted and applied by the CAT in Sainsbury's by calculating a weighted average MIF and counterfactual IF in order to calculate the overcharge percentage rate for each of the 16 years of the claim and for each of the four categories of purchases identified above in the VoC discussion.

iii. Pass-on
There was no dispute that acquiring banks passed on the MIF to merchants in the form of a Merchant Service Charge (MSC).Rather, the question was how much of the MSC was passed on to individual customers through increased retail prices.The applicant's expert argued that as a preliminary matter it was appropriate to assume a single, but not necessarily constant over time, weighted average MSC pass-on rate across the UK economy.That said, the applicant's expert rightly accepted under crossexamination that economics suggests pass-on will be determined by such factors as conditions of supply and demand and type of pricing regime.The applicant's expert further accepted that, within broad sectors, there was a wide variety of businesses which may have quite different rates of pass-through 64 so that pass-on rates for petrol stations may not be the same as for supermarkets, and that some of the factors affecting pass-on rates may also vary geographically across the UK.
Estimating a weighted average pass-on rate for virtually the whole of the UK retail sector would clearly be challenging.Nonetheless, the claimant's experts believed it should be possible on the basis of (a) information from the ongoing retailer claims actions against MasterCard; (b) disclosure from third parties; and (c) publicly available data.The CAT disagreed.Instead it emphasised: (a) the difficulties of extrapolating from evidence on ongoing cases involving claims made by retailers; (b) the costs and practical hurdles that would face extensive disclosure from third parties; and (c) the difficulties of interpretation and comparison if a weighted average pass-on were calculated based on the limited amount of publicly available data. 65n short, the CAT found that applying the proposed method across virtually the entire UK retail sector over a period of 16 years would be a hugely complex exercise requiring access to a wide range of data.It also believed that a proper effort would have had to be made to determine whether such a task is practicable by ascertaining what data are reasonably available.Accordingly, applying the test from Microsoft, 66 the CAT was unpersuaded on the basis of the material in front of it that there were sufficient data available for the proposed methodology to be applied on a sufficiently sound basis, so it was not satisfied that the claims were suitable for an aggregate award of damages.

Common versus individual issues
Table 1 describes six aspects of the application which the CAT described would be relevant for determining an individual claim and, in particular, whether each issue raised is common across individual claimants.The CAT concluded that the case did raise common issues, but that it also raised issues which were individual in character.to be 'top-down' to circumvent the non-common issues by seeking to go directly to determination of a total sum for all claims.The CAT decided that this kind of topdown approach can be permissible but only if there is a reasonable and practicable means of getting back to the calculation of individual compensation. 67ny aggregate damage award would need to be distributed across individuals.The applicant proposed calculating the aggregate loss on an annual basis for each of the 16 years in the claims period and dividing it on an equal, per capita, basis among all the class members for that year (all of those who were resident in the UK and over the age of 16 in that year).

The applicant's top-down methodology
However, when the applicant's experts were asked about this method by the CAT, they agreed that the proposed method bore no relationship to the individual loss. 68They recognised, for example, that individual losses would depend on customers' expenditure profile -how much a given individual spent on petrol verses groceries, as well as across a range of other sectors (airlines, restaurants and so forth).
The CAT considered how a claimant's loss would be estimated in an individual action for damages.It decided that since no individual can be expected to keep detailed records or receipts covering expenditure, the extent of expenditure would necessarily be approached on the basis of an assessment of disposable income, and then a broad estimation of how that income was spent between various products and services, and between various kinds of merchants. 69It went on to say that: 70 'The problem in the present case is that there is no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant from the aggregate loss calculated according to the Applicant's proposed method.'  The CAT concluded that the significance of the remaining individual issues (individuals' levels of expenditure; the merchants from whom they purchased; 1.That the level of the EEA MIFs had an effect on the level of UK MIFs (for both MasterCard credit and debit cards) Yes.The only truly common issue 2. The amount by which those MIFs were higher than the counterfactual IFs that would have applied in the absence of an infringement No.But it can be sensibly approximated by looking at a blend of the fees, following the approach in Sainsbury's.
On the basis that such an approach is appropriate for an individual claim, it becomes a common issue 3.The level of pass-through of these MIF overcharges in the MSC charged by Acquiring Banks to the merchants where the claimant bought goods and services Yes.Could theoretically vary, but accepted by both sides that pass-on is likely to be 100% 4. For each merchant at which the claimant purchased goods and services, the degree to which that merchant passed through those overcharges and the percentage impact on its prices No, not in any meaningful sense.Likely to be significant variation: between different kinds of goods and services between different kinds of retail outlet in the proportion of sales made by that merchant paid for by card compared to cash, since the lower the actual overcharge which it has to spread over the prices of its goods or services 5.The amount that the claimant spent at each of those merchants No and the mix of products which they purchased) made it impossible to see how the payments to individuals could be determined on any reasonable basis.The application for a CPO was denied.

V. Conclusions
Recently the UK courts have considered the first two collective actions, Mobility Scooters and the MasterCard consumer claim, as well as significant related actions for damages.The courts have been asked to consider conventional topics such as overcharge and pass-through in somewhat novel circumstances-vertical agreements in Mobility Scooters and a two-sided market in MasterCard.
In addition, at the CPO application stage, these collective actions have provided a sharp focus on the extent and nature of the variation in damage across claimants.While the CAT has rejected the CPO applications in both of these first two opt-out cases, it certainly does not mean that other cases will not survive scrutiny.Still, the CAT will need to continue to consider how high a burden it should place on the claimant before issuing a CPO when such decisions must be made on the basis of limited disclosure. doi:10.1093/jeclap/lpx062

Figure 1 :
Figure 1: The competitive benchmark in Mobility Scooters.Note: Author's estimates based on information available in the Mobility Scooters judgement.

Figure 2 :
Figure 2: MIFs in a four-party (plus card scheme operator) payment card scheme.
Pro-Sys Consultants Ltd v Microsoft Corp.[2013] SCC 57, the Supreme Court of Canada, cited by the CAT in Mobility Scooters at paragraph 104.Note this does not require the CAT to be satisfied there is some basis in fact for the claim itself.
files/Guide_to_Proceedings_2015.pdf accessed 7 August 2017.15 The absence of the predominance requirement (which comes from Rule 23(b), US Civil Procedure Rules) in the UK is described at paragraph 6.37, CAT Guide to Proceedings 2015, see http://www.catribunal.org.uk/files/Guide_to_proceedings_2015.pdf accessed 7 August 2017.16 Rule 79(2) of the Tribunal Rules describes such matters include: '(a) Whether collective proceedings are an appropriate means for the fair and efficient resolution of the common issues; (b) The costs and the benefits of continuing the collective proceedings; (c) Whether any separate proceedings making claims of the same or a similar nature have 31 Seven out of 38 models were covered by infringing agreements while 31 models were not covered.Paragraph 95, CAT judgement in Mobility Scooters, http://www.catribunal.org.uk/files/1257_Dorothy_Gibson_Judgment_CPO_CAT_9_310317.pdf.32 Transcript from day 2 of the hearing at page 75, available from http:// www.catribunal.org.uk/files/1257_Dorothy_Gibson_Transcript_131216.36 Aspects of the claim were related to the Commission's infringement decision (19 December 2007) which related to EEA MIFs (i.e., Interchange Fees in respect of transactions where a card issued in one EEA state is used at a merchant whose outlet is based in a different EEA state) but it is important to note that decision did not relate to UK MIFs (i.e., Interchange fees within the UK.) In particular, in relation to the 50 per cent not passed-on CAT award interest at the rate (i) At the rate of cash earnings on 20 per cent of the overcharge and (ii) At the rate of Sainsbury's new debt on 30 per cent of the total overcharge.61See paragraph 28, http://www.catribunal.org.uk/files/1.1266_Walter_Hugh_Judgment_CAT_16_210717.pdfaccessed 7 August 2017.
The applicant's methodology is not built up from the circumstances of individual claimants but rather is designed 62 Additionally, the CAT noted that the proposed VoC calculations would need adjustments post-disclosure from MasterCard should the proceedings continue to trial since the publicly available figures did not include: (i) purchases made in the UK with foreign-issued MasterCards or (ii) include purchases by UK cardholders overseas.63 See paragraph 34, http://www.catribunal.org.uk/files/1.1266_Walter_Hugh_Judgment_CAT_16_210717.pdf accessed 7 August 2017.64 See Day 1 Transcript, http://www.catribunal.org.uk/files/1266_Walter_hugh_Transcript__Hearing_1_180117.pdfaccessed 7 August 2017.65 In relation to (a), the CAT disagreed noting that: 'It would be impossible to extrapolate back from any findings or expert analyses of pass-through in around 2006 to derive meaningful figures for much of the claims period in the present action.'In relation to (b), the CAT made clear its view that: 'in view of the number of markets to be considered, the long period involved, and the wide range of data required to arrive at a meaningful estimate, this would be a very burdensome and hugely expensive exercise…..such extensive third-party disclosure is wholly impractical as a way forward.'In relation to (c), noting the overall finding of the RBB report describing that pass-through measures reported in the empirical literature, notably pass-through elasticities, are 'difficult to interpret and compare.' 66 Pro-Sys Consultants Ltd v Microsoft Corp. [2013] SCC 57, the Supreme Court of Canada, cited by the CAT in Mobility Scooters at paragraph 104.

Table 1 :
Common and individual issues in the MasterCard consumer claim Issue in the claim CAT: Is it a Common Issue?
. Level of individual spend is manifestly not a common issue 6.If the claimant held a MasterCard credit card, what if any interest payments were made and what if any benefits were received under that particular card No.In the Popplewell judgement, the two sides' experts agreed that at least a significant proportion of the MIF is passed through by the issuing banks to cardholders Note: See paragraphs 60-66, http://www.catribunal.org.uk/files/1.1266_Walter_Hugh_Judgment_CAT_16_210717.pdfaccessed 7 August 2017.