MasterCard and Visa judgments on interchange fees overturned on appeal

04 Jul 2018

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.