Supreme Court gives judgment on landmark Interchange Fee appeals


The Supreme Court (UKSC) has today given judgment on the Interchange Fee appeals. The judgment can be accessed here.

The UKSC has dismissed Mastercard’s and Visa’s appeals against the Court of Appeal’s (CA) finding that the first instance courts were bound by the Mastercard judgment of the Court of Justice of the EU to find that the multi-lateral interchange fees (MIFs) at issue in the domestic litigation restricted competition on the acquirer market. This was on the basis that the essential facts were materially identical in the domestic and European cases. The Court added that even if the courts were not so bound, it would nonetheless have concluded that the MIFs restricted competition: absent the MIF, the merchant service charge would have been fully determined by competition and significantly lower, rather than to a large extent determined by a collective decision.

The UKSC also dismissed the Schemes’ appeals on issues relating to the possibility of exemption from the prohibition on anti-competitive agreements, contained in Article 101(3) TFEU (and section 9 of the Competition Act 1998).

First, it ruled that the question of the nature of the evidence required to meet the first (“benefits”) exemption condition was one of EU law, and that EU law required cogent empirical evidence to be adduced by those claiming exemption.  In that context, the UKSC specifically rejected the Schemes’ suggestion that if a MIF satisfies the “merchant indifference test”, or “MIT”, it will necessarily satisfy the requirements of Article 101(3).

Second, it rejected Visa’s appeal against the CA’s interpretation of the “fair share” condition, holding that it had to be shown that, in a two-sided market, the adversely affected consumer class (here, merchants) were left at least no worse off as a result of the MIFs than without them.  It was insufficient to demonstrate that consumers as a whole (here, merchants and cardholders) would be left no worse off.

The Court has also provided guidance on the approach that courts should adopt to the issue of “pass-on”, confirming that it is open to a defendant to show that a claimant which has paid an overcharge as a result of an anti-competitive agreement has mitigated its loss in this way, and that precision as to the quantification of any such mitigation is not required in law.

Finally, the UKSC allowed the cross-appeal brought by Asda, Argos and Wm Morrison (AAM) against the CA’s order disposing of the appeals before it, in which the CA remitted the AAM v MasterCard case to the CAT for re-consideration of whether Mastercard’s MIF satisfied the exemption criteria, rather than declare the exemption issue to be resolved in AAM’s favour.

The UKSC held that the CA’s decision to remit the question of exemption in AAM’s case offended against the principle of finality in litigation.  AAM had won after a full and fair trial (and appeal).  It was not now open to Mastercard to seek to relitigate any of the exemption issues on which – had the trial judge not erred – it would have lost at trial. Thus, the correct order was to declare that the relevant MIFs charged to AAM were contrary to Article 101(1) and that Mastercard had failed to discharge its burden of proving that a MIF set at any positive level would have met the test for exemption under Article 101(3).  The AAM claims will now proceed to a trial on quantum.

Christopher Brown was instructed by Stewarts Law LLP for the AAM parties.