In the United Kingdom, and for the payment network giants in the decades-long legal battle over interchange fees — next stop, trial court?
Wednesday, the highest court in the U.K. upheld a 2018 ruling by a lower court, the Court of Appeal, that payments firms Visa and Mastercard had restricted competition for retailers by levying fees on transactions, known as multilateral interchange fees (MIF).
Those retailers — including plaintiffs/respondents (in the latest case) Sainsbury’s, Morrisons, Argos and Asda — had alleged that the fees were unlawful restrictions of competition laws in the European Union and the U.K.
The high court’s dismissal of Visa and Mastercard’s appeal paves the way for the retailers to seek compensation. And as reported by Reuters Wednesday (June 17), Morgan Lewis partner Frances Murphy, lead counsel for Sainsbury’s, said the damages could stretch into the billions of pounds.
“Sainsbury’s will now be seeking to recover the full amount of the unlawful charges it has incurred,” Murphy said, in the wake of the ruling.
Mastercard and Visa have said the U.K. ruling on Wednesday was not a final one. Additional hearings may take place next year, Mastercard has said.
Drilling down into the U.K. Supreme Court’s decision, language notes that the MIF is payable by acquirers to issuers on each transaction — expressed either as a percentage of the transaction value or a flat fee expressed in pence. Different MIFs apply to different transaction types, which can span contactless or card not present payments. MIFs can also vary according to whether acquirers and issuers are based in different regions or states.
The court found that though issuers are acquirers are not required to contract on the basis of the MIF — and are free to enter into bilateral agreements — they do indeed tend to contract on the basis of the MIF.
With a nod to the payment card schemes as operated by Visa and Mastercard, the court detailed the existence of two-sided markets — where on one side, issuers compete with one another for customers to whom they will issue cards, and on the other side of the market, acquirers compete for merchants’ business.
The issue under discussion during the proceedings and rulings of the various courts focused on the effects MIFs have on competition in the acquiring market.
The Supreme Court’s unanimous judgement upheld the earlier judgement by the Court of Appeal, which held that the fees infringe on article 101(1) of the Treaty of Functioning of the European Union (TFEU) and restrict competition in the acquiring market. The court also upheld findings that the payments firms had not established that the U.K.-based MIFs had caused benefits to end consumers.
As reported by Bloomberg Wednesday, Mastercard is currently facing “a series of lawsuits” filed by U.K. retailers that could see a leap in claims.
“This case will now provide guidance for the hundreds of other business claimants behind the lead cases,” said Rob Murray, a lawyer at Mishcon de Reya, who represented Sainsbury’s, as quoted by the newswire.
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