UK Competition Litigation Quarterly Update: Q1 2026

In the latest judgment in the interchange fees litigation, the CAT held that, for the majority of the merchant Claimants, the Defendants’ mitigation defence that the merchants passed on overcharges to their own customers failed.

On 18 February 2026, the CAT handed down its judgment in the second of three trials in the Merchant Interchange Fee Umbrella Proceedings. This follows a judgment handed down on 27 June 2025 in which the CAT held that the Mastercard and VISA scheme rules setting the multilateral interchange fees (MIFs) charged in the UK and Ireland by default on card transactions are anti-competitive (see our update on that judgment here).

The CAT’s judgment addresses three distinct species of pass on:

1. the Claimants’ case that the MIFs were passed on to them by the acquiring banks (that is, the bank of the merchant who is selling the goods during the transaction) in the form of higher merchant service charges (Acquirer pass on / APO).
2. the Defendants’ case that the Claimants mitigated any loss by passing on the overcharges/MIFs to their customers by way of higher prices (Merchant pass on / MPO).
3. the Defendants’ case that the Claimants mitigated their loss through renegotiation of the amounts paid to their own suppliers for other goods and services (Supplier pass on / SPO).

APO

The CAT found that the rates of APO varied depending on the type of contract between the acquirer bank and the merchant Claimant. While the Defendants accepted that for ‘costs plus’ contracts, the APO rate was 100%, far less straightforward was the position for so-called ‘standard’ and ‘blended’ contracts. For these, the CAT struggled with the lack of transparency in the contracts making it difficult to determine the applicable MIF rate and impact on charges; it arrived at a broad axe assessment of 85% APO.

MPO

The CAT approached the assessment of MPO on a sectorial basis, which was agreed between the parties to be appropriate given that there were thousands of Claimants, rendering an individual assessment process impracticable.

The CAT emphasised the requirement for the Defendants to prove a direct causal link between the overcharge being incurred by the Claimants and it being passed on (directly) in their price-setting, holding that it was insufficient for the Defendants to contend that pass-on of such a small cost may have occurred via an indirect channel in the long run, such as through ordinary planning and budgetary processes, margin targets or observation of competitor pricing.

For the vast majority of sectors, the CAT held that the Defendants had failed to prove any MPO. There were only three sub-sectors where the CAT found some measure of MPO: cash services such as money transfer (100%), insurance underwriting (46.7%), and travel agents and online intermediaries (47.5%). The CAT drew on the experts’ econometric analyses in reaching these figures.

Class representative Walter Merricks (whose claims against Mastercard on behalf of a class of consumers settled last year – see our previous update here) also participated in MPO trial, as his claims had not yet settled when the trial took place. His claims relied on establishing that there had been MPO to consumers, contrary to the merchant Claimants’ case. Although there was only a very limited overlap of the periods of the merchant Claimants’ claims and the period of Merricks’ claims, the CAT’s findings on MPO would have clearly been deeply unhelpful for Mr Merricks had his proceedings gone the distance.  

SPO

The CAT held that the Defendants had failed to prove any SPO. Notably, none of the experts were instructed to assess SPO, and the CAT doubted whether it had been pursued as a defence with any real conviction. 

Approaching the issue largely at the level of economic theory, the CAT placed reliance on the SPO defence running counter to economic incentives in dismissing the argument. In brief, businesses are incentivised to negotiate with their other suppliers as hard as they can to achieve the lowest possible prices in any event, such that incurring a small additional cost (through an anticompetitive MIF) is unlikely to spur them to negotiate more than they otherwise would have achieved. It dismissed Mastercard’s argument that the Claimants had failed to provide adequate disclosure of documents relevant to this argument and Mastercard’s call for the CAT to draw adverse inferences against the Claimants was rejected. The CAT considered that the most likely reason for there being no evidence of SPO was that “it simply does not occur”. The CAT’s comments underscore the inherent challenges in succeeding with this defence.

Commentary

The judgment illustrates the CAT adopting a high-level approach to the assessment of pass on when faced with claims from a large number of claimants. The approach taken differs quite starkly from the detailed individual assessment of pass on undertaken by the CAT in proceedings involving one or a small number of claimants (such as Royal Mail Group Limited v DAF Trucks Limited). While the high-level approach obviously involves a potential risk of rough(er) justice for both sides, in this case, it meant that many merchant Claimants avoided the burden (and attendant costs) of disclosure. Although claimants with high value claims are likely to prefer an individual assessment of loss in their case, those with more modest claims may well seek the high-level approach by pursuing their claims as part of group (and/or by seeking consolidation of their claims with others).

(Case 1517/11/7/22 (UM) – Umbrella Interchange Fee Claimants v Umbrella Interchange Fee Defendants)

The judgment can be found here.

The CAT rejected a non-party costs application made by the Defendants in the Boundary Fares litigation against the claim’s litigation funder, holding that the Defendants’ entitlement to costs should not exceed the level of the Class Representative’s adverse costs cover. This judgment provides important clarification that, including when it comes to rules pertaining to costs recovery, collective proceedings are subject to a different regime from ordinary civil litigation.

On 13 March 2026, the CAT handed down a significant costs judgment, following the landmark defeat of Class Representative (CR) Justin Gutmann’s multi-million pound claims against First MTR, London & South Eastern Railway and Govia Translink. You can read more about that judgment in our Q4 2025 Competition Litigation Update.

The Defendants sought to recover combined costs of over £28.5 million. However, the CR argued that his liability for costs should be capped at £15 million, on the basis that this was the total limit of the indemnity provided by his litigation funder, Woodsford Group Limited.

Summary assessment

Notwithstanding the CAT’s criticism of the level of the Defendants’ costs, described as “an eye-watering amount for these cases, which had not even approached trial on the question of quantum”, the CAT rejected the CR’s request that it summarily assess the costs at £15 million. The CAT held that summary assessment would clearly be inappropriate and that would be the position in any case where there had been a trial stretching over three weeks.

Non-party costs application

The primary question for the CAT to consider was whether a non-party costs order should be made against Woodsford. The CAT acknowledged that it has wide discretion to make such orders under rule 104 of the CAT Rules and emphasised that the Tribunal generally follows the approach of the High Court as regards costs (which includes ordering litigation funders to pay excess costs, where they are deemed to be the real beneficiary of the proceedings). However, the CAT drew a distinction between ‘ordinary civil actions’ and collective proceedings, which are subject to a “very different regime”.

The Tribunal highlighted that in collective proceedings, a CR’s ability to pay the defendants’ recoverable costs must be scrutinised under CAT rule 78(2)(d) and proposed defendants are able to oppose certification on the basis that the level of adverse costs protection held by the PCR is inadequate. By contrast, in ordinary civil litigation, a claimant’s ability to pay the defendants’ costs isn’t considered unless the defendants issue an application for security for costs, in respect of which the defendants bear the burden of satisfying the Court that security is appropriate.

In the cases at hand, the Defendants did not raise any issue as regards the level of adverse costs cover at the certification stage and, although they subsequently wrote to the CR complaining that the cover was “wholly inadequate”, they failed to provide estimates of their costs, ignored the CR’s proposal to exchange quarterly cost updates, and never made an application to the Tribunal to require increased cover. The CAT stated that the statutory safeguards built into the collective proceedings regime would be rendered “largely redundant” if defendants could simply bypass them and pursue funders for excess costs at the end of trial. The CAT considered the communications between the parties’ solicitors in some detail, considering them to be very relevant to the exercise of its discretion on costs.

The Tribunal distinguished the cases at hand from recent legal precedent:

• ChapelGate – The Defendants argued that, as in ChapelGate, the funder was the real beneficiary of the proceedings. The CAT rejected those submissions, holding that the funder’s return set out in the litigation funding agreement is not guaranteed as a matter of contract.It is always subject to the CAT’s supervisory jurisdiction and this is very different from the guaranteed benefit which the funder would have received in the event of judgment for the Claimant in ChapelGate.

• Le Patourel – The CAT distinguished its own recent decision in Le Patourel, where the funder was ordered to pay excess costs, on the basis that the funder in that case had provided an unlimited indemnity to the CR and had explicitly assured the Defendants of its vast resources to meet any adverse costs.

Having regard to the “structure of the statutory regime for collective proceedings” and the particular circumstances of the cases, the CAT concluded that the Defendants’ entitlement to costs should not exceed the £15 million of adverse costs provision and rejected the Defendants’ application.

Key takeaways

• Challenge adverse costs cover early and transparently: If defendants anticipate that their costs will exceed the CR’s cover as the litigation develops, it is important that they provide updated cost estimates and formally apply to the CAT to request increased cover.
• Collective proceedings differ from ordinary civil litigation: The CAT drew a sharp distinction between ordinary civil litigation and the collective proceedings regime. The CAT highlighted that in opt-out collective proceedings, a funder’s return is never guaranteed by contract and is subject to strict supervision by the CAT. 
• Non-party costs orders against funders are still possible: The CAT made clear that it still retains jurisdiction to make non-party costs orders against funders for amounts exceeding a CR’s adverse costs cover, but this is highly fact-specific.

(Case 1425/7/7/21 – Justin Gutmann v Govia Thameslink Railway Limited & Others)

The judgment can be found here.

The Court of Appeal has upheld the CAT’s decision finding that proposed collective proceedings brought on behalf of the customers of six UK water companies were excluded by operation of the Water Industry Act 1991. This was however a split decision, and the majority’s approach differed in some respects from the CAT’s original decision.

On 5 March 2026, a majority of the Court of Appeal (Sir Geoffrey Vos MR and Lady Justice Falk) handed down a judgment holding that the CAT had been correct to find in its judgment of 7 March 2025 (which we wrote about here) that claims made in proposed opt-out collective proceedings brought against six UK water companies were excluded by section 18(8) of the Water Industry Act 1991.

The proposed class representative, Professor Carolyn Roberts, had sought to bring claims alleging that the water companies had abused their dominance by misleading the regulator, Ofwat, through under-reporting pollution incidents, resulting in customers being overcharged for sewerage services. 

Central to the appeal was the CAT’s finding that the abuses of dominance which Roberts’ claim hinged upon were alleged infringements of the regulatory price control regime in place in the water industry, bringing those claims within scope of section 18(8), a provision which prohibits damages claims. 

Roberts challenged this finding in the Court of Appeal, arguing that her allegations about the water companies having misled their regulator constituted freestanding claims that were not reliant on the applicable price control regime, such that s.18(8) was not engaged. She characterised the claims as being based on the fact of misleading an authority, with the consequence that regulated prices were set by reference to misleading information. Roberts contended that while this alleged provision of misleading information also constituted misreporting for the purposes of the applicable regulatory regime, that was separate and immaterial notwithstanding the prominence of the regulatory regime and the water companies’ reporting obligations in her claim form. 

However, the majority considered that the analysis “cannot stop there” and that it was necessary to go on to consider the way in which the information was said to be misleading. They rejected Roberts’ argument that the regulatory context was merely factual and regulatory “background” that could be excised from the claim form without losing anything, holding that the pleading would be “incoherent and, in reality, incomplete” without it. They concluded that the allegation of providing misleading information to Ofwat was necessarily founded on the water companies’ statutory duty to make accurate reports and could not be pursued without the existence of that duty, meaning that section 18(8) was engaged.

This contrasted with the CAT’s approach of applying section 18(8) on the basis that the alleged loss could not be established except by reference to the regulatory regime. 

Zacaroli LJ gave a dissenting judgment, in which he came to a different interpretation of the relevant statutory provision that would mean that the claims were not excluded. His judgment, which set out a point-by-point rebuttal of the majority’s analysis, concluded that that the competition claims advanced by Roberts were not dependent on showing that the alleged provision of inaccurate information contravened the water companies’ license conditions. 

Although the case turned on the construction of s.18(8) and is in that sense highly case (and sector) specific, the judgment illustrates a broader theme for the collective actions regime as to where regulation and competition law intersect. The Court of Appeal’s focus on the way the competition law claims were framed (including the significance of the regulatory regime for the core allegations) underscores the particular importance of properly structuring claims brought against a regulatory backdrop and delineating the actionable competition law complaint from any coinciding regulatory obligations. 

(Case CA-2025-001337 – Professor Carolyn Roberts v Severn Trent Water Limited and others)

The judgment can be found here.

Following a five-week trial, Which? has applied to withdraw its £480 million class action against Qualcomm, under a proposed settlement agreement involving no money being paid to the class. In a public statement issued on 17 February 2026, Which? stated unequivocally that it does not believe Qualcomm engaged in any anti-competitive conduct. The CAT will consider whether to approve the settlement at a hearing scheduled for 18 May 2026.  The proposed settlement raises an important question as to how the CAT will respond where a certified opt-out collective action is withdrawn after trial, on terms that involve no compensation at all for the class of consumers. 

Which?, the UK consumer rights organisation, has applied to withdraw its £480 million class action against Qualcomm, following a five-week trial before the CAT, pursuant to a proposed settlement under which Qualcomm will pay no compensation to the class.

In 2019, Which? brought an opt-out claim on behalf of an estimated 29 million consumers, alleging that, due to the chipmaker's (Qualcomm's) licensing strategy, consumers had overpaid for mobile phones they had purchased.

The claim alleged that Qualcomm, which supplies chipsets to smartphone manufacturers and licences its patented technology to phone companies, charged Apple and Samsung inflated royalties for a licence to use its patents. Which? alleged that this behaviour led to consumers paying artificially high fees for the end-product smartphones.

A five-week trial took place between October and November 2025, where the Tribunal heard from both Which? and Qualcomm on the £480 million claim.

On 17 February 2026, with judgment following the trial still pending, Which? issued a public statement explaining that it had applied to the CAT for permission to withdraw the claim in its entirety.

Which? explained that a provisional settlement agreement had been reached in which proceedings would be dropped, without any payment to the class from Qualcomm.

The statement further noted that Which? had concluded, based on the evidence and arguments presented at trial, that Qualcomm did not coerce Apple or Samsung into signing the agreements, did not leverage its position to coerce Apple or Samsung to agree to any licensing terms and Qualcomm did not engage in any practices that infringed competition laws or resulted in increased prices to consumers.

The proposed withdrawal of a certified opt‑out collective action, following a full merits trial and on terms involving no compensation to the class at all, is an exceptional outcome in the context of CAT proceedings. That rarity is amplified by Which?’s public acknowledgment that, having seen the evidence tested at trial, it no longer considers Qualcomm to have engaged in any conduct infringing competition law.

The proposed settlement raises an important question as to how the CAT will respond where a certified opt-out collective action is withdrawn after trial, on terms that involve no compensation at all for the class of consumers. The forthcoming settlement hearing on 18 May 2026 will therefore be closely watched. In particular, it will be interesting to see whether the CAT is prepared simply to approve the settlement on the basis that the Class Representative no longer wishes to pursue the claim, or whether it considers that the circumstances warrant a more interventionist approach. At a conference in March 2026 the CAT President Mrs Justice Bacon, who is hearing the case, seemed to indicate the former, noting that she had spent three months writing a judgment in the case that will “never see the light of day”. 

However, that may not be the end of the story. Issues may also arise as to whether Which? acted properly in the best interests of the class in issuing the press release, which arguably undermined the class’s position at a time when judgment in the claim remained pending and the settlement had not yet been approved by the CAT.

Watch this space for a future update on whether the CAT gives the settlement the green light and which other issues, if any, are ventilated at the settlement hearing.

(Case 1382/7/7/21 – Consumers' Association v Qualcomm Incorporated)

Which?'s public statement can be found here.