No Exemption for Interchange Fees

27 Feb 2018

Sainsbury’s Supermarkets Ltd -v- Visa Europe Ltd and Or – Latest decision

In a judgment of 30 November 2017 [2017] EWHC 3047, Phillips J held that Visa’s UK MIFs did not restrict competition within the meaning of Article 101(1). In a subsequent judgment dated 23 February 2018 [2018] EWHC 355 Phillips J held that if Visa’s UK MIF did in fact infringe Article 101(1), Visa’s UK MIF did not merit exemption under Article 101(3) and would not have been exempt “at any level.”

The basis for the conclusion in the exemption judgment was the failure by Visa to prove that the first condition in Article 101(3) was satisfied. This was interpreted by the CJEU in Case C-382/12 P MasterCard v Commission as meaning that there must be “appreciable objective advantages arising specifically from the MIF and not merely from the …system as a whole”(para 232).

Phillips J concluded that there was “a complete absence of evidence of a real, observable and measurable link” between the MIF and the alleged efficiencies that were said by Visa to simulate card use. Phillips J pointed out that there was no real evidence to show that the MIF was linked to any specific efficiency as opposed to improving the banks’ profitability. Phillips J also pointed out that the banks already obtain considerable revenue in the form of interest payments through the use of payment cards which already incentivised the banks to stimulate card use.

Phillips J rejected the contention that exemption can be obtained using a broad-brush approach often applied in assessment of damages. The Judgment, which reflects established EU law, required a more robust and empirical analysis.

Both judgments will be the subject to further scrutiny by the Court of Appeal for 3 weeks commencing 9 April 2018. At the same time the Court of Appeal will hear appeals from two other judgments relating to MasterCard’s UK MIFs:  an appeal by MasterCard in Sainsbury’s Supermarkets v Mastercard [2016] CAT 11: and an appeal by Asda and other retailers in Asda Stores v MasterCard [2017] EWHC 93 Comm.

Highlighting the importance of the three appeals to the correct interpretation of Article 101 the European Commission submitted written Observations to the Court of Appeal on 21 February 2018 and has applied to make oral submission at the hearing.

Mark Brealey QC, instructed by Morgan, Lewis & Bockius UK LLP, represented the Claimant, Sainsbury’s Supermarkets Ltd.

See judgment here.