The Injustice of the Mastercard Litigation Settlement: £2 for Claimants, £100m for the Funder.
The long-running class action against Mastercard, led by class representative Walter Merricks, has come to a disheartening conclusion, one that raises serious questions about the fairness and ethics of the modern class action system. Under a proposed settlement, Mastercard has agreed to pay £200 million to discontinue the opt-out class representative action, which has been ongoing for nearly nine years. But the settlement, far from bringing justice to the millions of claimants affected by Mastercard’s allegedly anti-competitive card processing charges, offers them a pittance in comparison to the windfall set to be reaped by litigation funders.
As it stands, eligible claimants will receive just £2.27 each if all 44 million affected individuals come forward. That’s barely enough to buy two packets of crisps. For some, the compensation will be capped at £45, with the more generous cap proposed by Merricks capping individual payouts at £70. This is the fruit of a £10 billion claim that originally sought to hold Mastercard accountable for anti-competitive conduct that affected millions of UK consumers between 1992 and 2008.
So, who stands to benefit from this settlement?
Certainly not the claimants, who will receive little more than pocket change for the years of inflated fees they paid, as a result of Mastercard’s actions. Instead, the biggest winner in this case is Innsworth Capital, the litigation funder backing the claim, which stands to collect as much as £100 million. Of that, £45.57 million will go to cover incurred and future costs of the litigation, while up to £54.43 million will be a return on its original investment in the case. In other words, while consumers might get a few quid, the financial backers of this long and complex case stand to reap an enormous reward.
This situation is the epitome of the injustices inherent in the current landscape of litigation funding. Litigation funders, such as Innsworth, act as profit-driven entities, backing cases with the sole aim of securing a significant return on their investment. It’s not about justice; it’s about generating profit, often at the expense of the very people the litigation is meant to help. In this case, the funder’s return far outweighs what is being offered to those who were actually wronged by Mastercard’s business practices.
It’s hard not to feel that this is a stark betrayal of the very purpose of class actions. These proceedings are meant to allow consumers to come together and seek redress for harm that would be impossible to challenge individually, especially in the face of enormous corporate power. However, when the payouts are so small, and the funders so handsomely rewarded, one must question whether the true interests of the class are being served at all.
Some might argue that the settlement, even with its meagre payouts, still represents a form of justice. After all, the case has been prolonged for nearly a decade, and legal battles of this scale often involve significant costs and complexities. But the reality is that this settlement is a classic case of litigation funding gone wrong. The funder’s profits are disproportionate to the compensation for the class, leaving us to wonder: if the case had been allowed to run its course without the influence of private financial interests, might the outcome have been different?
Seema Kennedy, from the campaign group Fair Civil Justice, sums up the frustration felt by many: "After almost nine years of litigation - including huge costs to the British taxpayer in funding countless hearings - we now know that affected consumers stand to gain just over £2 each in compensation, while the funder could be in line for a £100m payout."
This is not justice. This is a system where corporate giants like Mastercard can continue to operate with little more than a slap on the wrist, while the individuals they harmed see little to no restitution for their suffering. And worse still, litigation funders, whose involvement is supposed to facilitate justice for consumers, seem to be the only true beneficiaries of these long-running, complex cases.
At the heart of this issue is the question of whether litigation funding, in its current form, is truly serving the interests of justice. If these funding arrangements lead to such lopsided outcomes, where the victims of corporate wrongdoing receive mere pennies while funders line their pockets, is the system working as intended? Or is it, as some critics argue, perpetuating an injustice that puts profit above fairness?
The Mastercard litigation is just one example of how the class action system, originally designed to deliver justice for the many, is being distorted by the financial interests of a few. Until reforms are made that put the victims at the centre of the process, the scandalous outcomes we’re witnessing here may continue to be the rule, rather than the exception. The question we must ask is: is this really the kind of justice we want? Or is it time for a fundamental rethinking of how litigation funders should operate, and who they should ultimately be accountable to?
Until then, millions of affected consumers will be left with a bitter taste in their mouths—one that not even two packets of crisps can help alleviate.
Seema Kennedy, executive director of business-backed campaign Fair Civil Justice, said 'After almost nine years of litigation - including huge costs to the British taxpayer in funding countless hearings - we now know that affected consumers stand to gain just over £2 each in compensation, while the funder could be in line for a £100m payout.
'This is the economics of a legal system in which lawyers and funders are prioritised over British business and consumers. This claim shows why reform is so badly needed, and we will continue to call on the government to introduce measures to improve transparency and accountability of the funding sector.'
