Court of Appeal allows Sainsbury’s appeal: Visa’s and MasterCard’s interchange fees infringe article 101(1) TFEU

In a landmark judgment on private actions for damages for infringement of competition law, the Court of Appeal has clarified the law in this field, reconciling considerable differences in the approach taken to multilateral interchange fees in cases before the Competition Appeal Tribunal and Commercial Courts.  

On the central question in issue, the Court allowed the appeals of Sainsbury’s and other retailers, and held that MasterCard’s and Visa’s multilateral interchange fees (“MIFs”) restricted competition and were not objectively necessary.  Accordingly, the Court held that the MIFs infringed Article 101(1) TFEU and Chapter 2 of the Competition Act 1998.  

The question whether MasterCard or Visa had proved that their MIFs qualified for exemption under Article 101(3) TFEU was remitted to the CAT for reconsideration (but not retrial) in accordance with the principles established in the judgment.  No new evidence can be adduced on remittal.  

The principles the Court laid down include: (i) the card schemes must establish a causal link between the restriction of competition and any net benefits said to derive from the MIFs by robust analysis and cogent factual and empirical evidence; (ii) the “fair share” condition requires the schemes to demonstrate that merchants (and not merchants and cardholders taken together) would be no worse off as a consequence of the restriction of competition; and (iii) in order to establish that the MIFs are indispensable, the card schemes must prove that the particular level of MIFs for which they contend is indispensable to achieving the relevant benefits. 

The Court of Appeal also clarified two important issues concerning quantification of loss.  First, the card schemes (not the merchants) bear the burden of proving the lawful level of MIFs.  Second, to establish pass on, the card schemes have to prove that there is a sufficiently close causal connection between an overcharge and an increase in the direct purchaser’s price.

The judgment is likely to benefit other retailers in interchange fee cases.  It will also be of substantial assistance to claimants more generally in future private actions for damages for breaches of EU and UK competition law. The principles established by the Court of Appeal endorse the arguments advanced by Sainsbury’s and the other retailers.

Derek Spitz acted for Sainsbury’s, instructed by Mishcon de Reya (against MasterCard) and by Morgan Lewis (against Visa).

Please click on the attached links for a full version of the Judgment and Press Release.