2019-08-03_The_Economist

60 Finance & economics The EconomistAugust 3rd 2019

2 Germany between 2000 and 2015. One sign

that the less well-off claim a smaller slice of

the economic pie is that household spend-

ing fell over that period as a share of gdp.

The rich tend to spend a smaller share of

their incomes than the poor. German ty-

coons are also thriftier than their peers

elsewhere. Though Germany’s authorities

tend to blame an ageing society for its high

savings rate, the true culprits appear to be

the moguls of the Mittelstand.

Germany’s tax system does little to

counter these trends. Revenues from prop-

erty taxes are relatively low and falling. Re-

forms in 2009 excluded business wealth

from inheritance tax. As wealth accumu-

lates, the share of income flowing to the

rich rises, further widening inequality.

Government officials say that some of

these trends are reversing. The labour mar-

ket has tightened, allowing wages to rise

and profits to fall. But the imfreckons that

in order for disposable household incomes

to regain their 2005 share of gdp, wage

growth would have to outstrip nominal

gdpgrowth by 1.5 percentage points for the

next decade—a tall order.

Policy could speed things along: tax re-

lief for low-income households to reduce

the concentration of income, and property

and inheritance-tax reform to reduce the

concentration of wealth. But that would

mean recognising that a much-vaunted

economic model is in need of repair. 7

Germany

Gone askew

Sources:IMF;OECD

Share of the top 1% in total net household wealth

2014 or latest, %

0 1020304050

United States

Netherlands

Germany

Denmark

Britain

Norway

France

Spain

Australia

Italy

Japan

Greece

Income share

of top decile, %

Current-account

balance, % of GDP

19922000 1610

10

8

6

4

2

0

-2

19922000 1610

32

30

28

26

24

T

he laughing stopped long ago. Be-

tween 2007 and 2013, in online chat-

rooms called “Three Way Banana Split”,

“Essex Express ’n the Jimmy” and other rib-

ticklers, currency traders yapped about all

sorts of things—including market tactics.

The banter has cost their employers dear.

Banks have been fined over $10bn for mar-

ket-rigging by American and European reg-

ulators, including €1.1bn ($1.2bn) by the

European Commission in May. An Ameri-

can class action cost 15 banks $2.3bn. But a

lawyer’s work is never done. On July 29th

Scott+Scott, an American law firm, filed a

collective-action case at the Competition

Appeal Tribunal (cat), an antitrust forum

in London.

Cases like this are still a novelty in Brit-

ain, despite a theoretically helpful change

in competition law in 2015. Collective

claims may now be brought to the caton

an “opt-out” basis, in which members of a

specified class are included in the claim

unless they choose not to be. If a monopo-

list rips off its customers, it may do lot of

harm in total, but the damage to each may

be small. Given the cost of going to court,

many may not bother suing. But the easier

a collective-action case is to bring, the like-

lier they are to gain redress.

The expense of bringing a case to the

cat—and the risk of defeat—are borne by a

newish breed of firms specialising in fi-

nancing litigation. If an action succeeds,

claimants (if they are traced) get their

awards in full. The financiers are paid out

of undistributed damages.

Therium Capital Management, estab-

lished in 2009, is backing the foreign-ex-

change case. British-domiciled compa-

nies, pension funds and other investors are

included automatically, unless they opt

out (foreign claimants must opt in). Cases

are led by a representative who may or may

not belong to the class. The forex suit is

fronted by Michael O’Higgins, a former

head of Britain’s Pensions Regulator. Mr

O’Higgins estimates the damages to be at

least £1bn ($1.2bn).

Few collective cases have yet reached

the cat. One, against a maker of mobility

scooters, was withdrawn in 2017. Two in-

volve claims by hauliers against lorry

manufacturers. In another, a consumer

champion argues that railways are, in ef-

fect, charging commuters into London

twice for the part of their journey that over-

laps with Transport for London’s network.

By far the biggest case is heading to Brit-

ain’s highest court. The representative,

Walter Merricks, an ex-head of the Finan-

cial Ombudsman Service, a dispute-settle-

ment body, claims that between 1992 and

2008 some “interchange” fees set by

Mastercard, though paid by merchants ac-

cepting its cards, harmed consumers be-

cause they were passed on in higher prices.

(The European Commission banned the

fees in December 2007.) Mr Merricks puts

the damage at a whopping £14bn. In July

2017 the catruled the claim ineligible, say-

ing that the damage to consumers, in ag-

gregate or individually, could not be accu-

rately assessed. In April the Court of Appeal

declared that the cathad been too hasty.

On July 24th the Supreme Court said it

would hear an appeal by Mastercard

against the Court of Appeal’s judgment.

The busy Supreme Court will not hear

the case before February and possibly not

for a year. Because it concerns the criteria

for the cateven to consider damages, its

verdict will be eagerly awaited by lawyers,

litigation financiers and consumer watch-

dogs. Whatever the outcome of the foreign-

exchange case, banks will face more bills.

Several big investors are suing on both

sides of the Atlantic, reckoning they will

win more in conventional damages claims

than from American class actions or their

British imitators. 7

Banks are in the frame for Britain’s latest collective legal claim

Class-action lawsuits

The CAT and the (alleged) fiddle