MasterCard and Visa judgments on interchange fees overturned on appeal

After an unprecedented 10-day hearing, the Court of Appeal handed down judgment today in the three linked appeals on the lawfulness of interchange fees, in Sainsbury’s v MasterCard (Competition Appeal Tribunal), Asda and others v MasterCard (Commercial Court) and Sainsbury’s v Visa (Commercial Court).

In the UK, interchange fees are fees charged on all card purchases.  They are charged by the banks who issue cards to cardholders to the banks who provide services to retailers.  They are passed on to the retailers themselves in ‘merchant service charges’.

The case is the biggest competition appeal for many years and the Court of Appeal’s decision has been keenly awaited.  There are currently scores of cases pending in the English courts, as well as in the courts elsewhere in the EU, concerning the legality of banks’ interchange fees.  The case turns on points of fundamental importance in competition law damages claims, and is of much wider interest and significance too.

Sainsbury’s was represented in the Court of Appeal and below by Mark Brealey QC, instructed by Morgan Lewis and Mishcon de Reya.  Asda, Argos and Morrisons brought in Jon Turner QC and Meredith Pickford QC to lead on the appeals, instructed by Stewarts.  Given the importance of the case, the European Commission, represented by Ronit Kreisberger as well as Nicholas Khan QC of the Commission Legal Service, unusually appeared to make oral submissions to the Court of Appeal, which in substance supported the retailers’ cases on Article 101(1) and (3) TFEU.

In a striking outcome, the  Court of Appeal upheld all the retailers’ appeals against the judgments below by two Commercial Court judges.  In particular, the Court of Appeal has now made clear that the banks’ interchange fee arrangements were restrictions of competition under Article 101(1) TFEU.  It also overturned the conclusions of the Courts below on whether the restrictive practices were justified in the interests of economic efficiency under Article 101(3) TFEU.

The cases will now be remitted to the Competition Appeal Tribunal for further directions.

The judgment can be read here.

This case has been covered by BBC News.

Court of Justice rules against the UK in gender reassignment case – MB v Secretary of State for Work and Pensions

In an important ruling issued today, the Court of Justice has held that, in requiring a transgender person to be unmarried in order to be recognised in her acquired gender for the purposes of claiming a state retirement pension (SRP), UK legislation gave rise to discrimination on grounds of sex, contrary to EU law. The case will now return to the Supreme Court to apply the ruling.

Prior to the legalisation of same sex marriage, the Gender Recognition Act 2004, which establishes a mechanism for the legal recognition of changes in gender, required a transgender person to be unmarried in order to be legally recognised in her acquired gender. Any pre-existing marriage therefore had to be annulled before a gender recognition certificate could be issued. As a result, a person who remained married to a person of the same sex as her acquired gender was prevented from claiming a SRP from the pensionable age for persons of that gender.

MB was a male-to-female transgender person who had been denied her SRP from the pensionable age for women on the basis that she remained married to her wife. Whilst the refusal was in accordance with domestic legislation, MB claimed that it was contrary to EU Directive 79/7/EEC on equal treatment in matters of social security. Whilst her claim was dismissed by both the Upper Tribunal and the Court of Appeal, the Supreme Court was divided on the point and referred the issue to the Court of Justice.

In today’s ruling, the Court of Justice has found in MB’s favour, holding that the relevant provisions of the 2004 Act gave rise to direct discrimination on grounds of sex. In particular, it found that Article 4(1) of the Directive precluded: “national legislation which requires a person who has changed gender not only to fulfil physical, social and psychological criteria but also to satisfy the condition of not being married to a person of the gender that he or she has acquired as a result of that change, in order to be able to claim a State retirement pension as from the statutory pensionable age applicable to persons of his or her acquired gender”.

The relevant provisions of the 2004 Act were amended in 2014, to reflect the legalisation of same sex marriage. The Court of Justice’s ruling will, however, be welcomed by the transgender community in the UK and may have significant wider implications for the rights of transgender people across the EU.

Ben Lask is acting for the Secretary of State for Work and Pensions.  The Court of Justice’s judgment can be read here.

This case has been covered by BBC News and The Guardian.

Please click here to read the news item on the Upper Tribunal ruling, and here for the news item on the Court of Appeal judgment.

Award of Lancashire Children’s Services Contract to Virgin Care Set Aside

Lancashire Care NHS Foundation Trust v Lancashire County Council [2018] EWHC 1589 (TCC)

The High Court (Mr Justice Stuart Smith) has today handed down a judgment setting aside the award of a contract for public health nursing services by Lancashire County Council to Virgin Care Services Limited.  The Court has upheld a challenge made by the Claimants, two local NHS Trusts, to the Council’s decision on the basis that the Council failed to give adequate or sufficient reasons for the scores it awarded to the two bidders in the evaluation. The Court held that:

“I am satisfied that the notes do not provide a full, transparent, or fair summary of the discussions that led to the consensus scores sufficient to enable the Trusts to defend their rights or the Court to discharge its supervisory jurisdiction.”

The Court held that the inadequacy of the reasons given by the Council was such that the Court was not able to determine whether the scores awarded by the Council contained manifest and material errors.  The Court did not accept certain other criticisms which the Trusts made of the conduct of the procurement.

The trial took place over 5 days concluding on 1 May 2018. The Judgment follows an earlier ruling of the High Court in February 2018 suspending the conclusion of the contract with Virgin pending trial – see link here.

Rob Williams acted for the successful Claimants throughout the proceedings, instructed by Hempsons.

A copy of the Judgment can be found here.

Flynn / Pfizer v CMA: the CMA misapplied the test for excessive pricing

The Competition Appeal Tribunal handed down a Judgment today setting aside parts of the CMA’s decision imposing combined fines on the pharmaceutical companies, Pfizer and Flynn, of around £90 million for charging unfairly high prices for the anti-epileptic drug, phenytoin sodium capsules, in breach of Article 102 TFEU / the Chapter II prohibition.

Although the Tribunal upheld the CMA’s findings that Pfizer / Flynn each occupied a dominant position in the relevant market, it struck down the findings of abuse on the basis that the CMA was wrong in law to confine its methodology for testing whether the drug prices were excessive to a purely “Cost Plus” approach. The Tribunal held that the correct approach, which the CMA should have but failed to adopt, was to identify a benchmark price or price range which would have applied in conditions of “normal and sufficiently effective competition”. In determining that benchmark price, the CMA should have given proper consideration to whether phenytoin sodium tablets – the prices of which were higher than the allegedly excessive prices for capsules – served as a meaningful price comparator. The CMA also erred in law in failing to have any regard to the benefit to patients of phenytoin capsules in determining their economic value.

The Tribunal has indicated that its provisional view is to remit the matter back to the CMA for further consideration, but has invited written submissions from the parties before coming to a final decision on remedy.

Mark Brealey QC acted for Pfizer.

Ronit Kreisberger acted for Flynn.

Click here for the full judgment.

Secretary of State announces decision and publishes CMA final report on Fox’s proposed acquisition of Sky

On 5 June 2018, the Secretary of State for Digital, Culture, Media and Sport published the final report of the Competition and Markets Authority (CMA) and announced his decision on the proposed acquisition by Fox of the remaining shares in Sky plc.

The CMA’s final report confirms its provisional finding that the transaction is not in the public interest due to media plurality concerns. The CMA concluded that the transaction may be expected to result in insufficient plurality of persons with control of media enterprises in the UK because it would lead to the Murdoch Family Trust (MFT), which owns 39% of Fox and News Corp, holding too great a degree of control over the diversity of viewpoints consumed by audiences in the UK, and would give the MFT too much influence over public opinion and the political agenda. The CMA also confirmed its provisional finding that there are no public interest concerns arising from lack of a genuine commitment to meeting broadcasting standards in the UK.

The CMA concluded that only prohibition or the divestiture of Sky News would provide an effective solution to the identified adverse public interest effects. Of these two options, the CMA recommended that the most effective and proportionate remedy would be the divestiture of Sky News to Disney or to another suitable upfront purchaser.

The Secretary of State has accepted the CMA’s findings and recommendations. Fox has written to the Secretary of State to offer undertakings on effectively the same terms as set out by the CMA in its final report. The Secretary of State has asked DCMS officials to begin immediate discussions with the parties to finalise the details of the undertakings with a view to agreeing an acceptable form of the remedy. The Secretary of State will then consult on the proposed undertakings.

Kassie Smith QC, Alistair Lindsay and Julian Gregory are advising the Secretary of State.

Rob Williams is advising the CMA. Conor McCarthy is also advising the CMA with their investigation.

George Peretz QC and Azeem Suterwalla are advising an interested party Avaaz.

Bratt v. HMRC – formal requirements for VAT repayment claims

The Court of Appeal has decided that VAT repayment claims made under section 80 VATA must refer to quarterly or monthly accounting periods. In Bratt, the taxpayer purported to make a Fleming claim for the whole of 1989 without identifying which of the sums claimed related to particular accounting periods. The Court of Appeal agreed with HMRC that this was not a valid claim since a claim under section 80 was one to recover an amount which was not in fact VAT which had been accounted for to HMRC “for a prescribed accounting period”. Therefore, the claim had to identify the relevant accounting period and the quantum of the claim was the amount of VAT overpaid in that period. This requirement also had the “sound purpose” of allowing HMRC to determine with certainty from the outset whether the whole or any part of the claim was out of time, or whether HMRC needed to go on and investigate it.

Raymond Hill acted for HMRC before the Court of Appeal.

Click here for the full judgment.

Ronit Kreisberger – Joint Lead Counsel for European Commission Written Observations on MasterCard and Visa MIF claims

On 23 May, the European Commission published its Written Observations submitted under Article 15(3) of Regulation 1/2003 in the Appeals in the English Court of Appeal against the 3 first instance Judgments dealing with the claims against MasterCard and Visa for recovery of multilateral interchange fees (MIFs).

Article 15(3) provides that the Commission may, acting on its own initiative, submit written observations to national courts where the coherent application of Articles 101/102 so require. The Commission may also make oral observations with the permission of the court in question.

Given the significance of the UK Appeals in the context of the competition law analysis of MIFs, the Commission made Written Observations on the Article 101(1) issues (attached here) and the Article 101(3) issues (attached here). The Commission also made oral submissions, with the Court’s permission, on both topics at the hearing of the Appeals.

Ronit Kreisberger acted as Joint Lead Counsel with Nicholas Khan QC for the European Commission.

Kassie Smith QC appointed to carry out independent review of the Jersey Competition and Regulatory Authority

Kassie Smith QC has been appointed by the States of Jersey to carry out an independent review of the Jersey Competition and Regulatory Authority (JCRA) following the Royal Court judgment in ATF Overseas Holdings Ltd v JCRA.

The review will look into the circumstances leading up to a decision by the JCRA that ATF Fuels had abused a dominant market position. The Royal Court overturned this decision and this independent evaluation of the circumstances surrounding the case will investigate whether the JCRA discharged its legal duties appropriately, and whether there are any significant deficiencies in how Jersey competition law has operated.  Terms of reference were published in a Ministerial Decision on 20 March 2018.

The initial phase of the review will involve a documentary review, followed by meetings with stakeholders to address points of clarification.  It is anticipated that a draft report will be completed in the summer.

This has also been covered by the Bailiwick Express; see here.

Tariq v UK: Lack of Gist in Closed Proceedings Not Unfair

Gulamhussein and Tariq v United Kingdom, application nos. 46538/11 and 3960/12

The recent decision of the European Court of Human Rights in Tariq v UK has significant implications for the use of closed material procedures in civil proceedings in which article 6 ECHR is engaged.

Mr Tariq was employed by the Home Office as an immigration officer. In 2006, his security clearance was revoked due to his “close association with individuals suspected of involvement in plans to mount terrorist attacks” and he was dismissed from his job. Mr Tariq attempted to challenge the decision in the Employment Tribunal but the Home Office refused to disclose the evidence supporting its revocation of his clearance. A special advocate was appointed to represent him in closed proceedings but Mr Tariq complained that he was not provided with a gist of the accusations contrary to the principle identified by the ECtHR in A and others v United Kingdom (2009) 49 EHRR 29. In Mr Tariq’s appeal in 2011, however, the Supreme Court held that the principle in A and others did not require a gist to be provided in every case in which article 6 ECHR was engaged.

In Tariq, the First Section agreed with the Supreme Court, noting that article 6 ECHR did not mean that it was “invariably essential for someone to know the “gist” of the case against them” (para 84). It also noted that, despite the lack of disclosure, the special advocate had been able to make submissions on Mr Tariq’s behalf and the resort to closed proceedings had not been arbitrary or manifestly unreasonable.

Eric Metcalfe acted for the human rights organisation JUSTICE as third-party intervener, led by John Howell QC.

A copy of the Court’s judgment is available here.

Two wrongs don’t make a right: The Supreme Court’s Decision in R (Gallaher and Somerfield) v Competition and Markets Authority [2018] UKSC 25

The Supreme Court has considered the way in which the OFT conducted its ‘Early Resolution’ settlement negotiations with parties who were subject to its tobacco investigation.  In overturning the decision of the Court of Appeal, the Supreme Court has held that a mistake made to the benefit of one party in a settlement negotiation is not required to be replicated to the benefit of other similarly situated parties. It so concluded on the basis of traditional principles of public law rationality, rejecting the opportunity to fashion any stand-alone principle relating to mistakes in public law.

Daniel Beard QC and Brendan McGurk acted for the successful appellant, the CMA.

Click here for the full judgment.