UK’s Supreme Court Lands Heavy Blow Against Visa and Mastercard

In a historic victory for merchants, the UK’s Supreme Court has unanimously upheld the Court of Appeal’s previous ruling, finding that interchange fees do amount to a restriction of competition, insofar as they set a floor, below which merchants cannot negotiate with their acquirer.

Supreme Court Against VISA and Mastercard

As liability under Article 101(1) is binding in all other similar proceedings against Visa and Mastercard, we now expect a large volume of new claims to be issued from merchants who have, until now, been sitting on the fence.

The merchants involved in the appeals – Sainsbury’s, Argos, Asda and Morrisons – beat Visa and Mastercard on all major issues, taking away much of the leverage the card schemes still had left.

The proceedings will continue separately, with Sainsbury’s cases referred to the Competition Appeal Tribunal (CAT) to discover whether a certain level of MIF could be exempted and, therefore, deemed lawful. Under Article 101(3), a MIF can be allowed provided it directly “promotes technical or economic progress… which the merchants receive a fair share of”.

However, this ruling lays down a very heavy burden of proof on the card schemes which should make it very difficult for them to establish any such exemption. If an exemption is established, then the losses due to Sainsbury’s would be the difference between that established rate and the MIF actually charged during the claim period.

The other merchants – Argos, Asda, Morrisons – seem to have won on the basis that there exists no lawful level of MIF, with the card schemes unable to fall back on Article 101(3). Ostensibly, this means they will have to pay back all interchange fees during the claim period. However, Mastercard could reduce its liability if it can prove that the merchants directly passed-on interchange fees in the form of higher prices, which is unlikely. This would mean that the losses were not suffered by the merchants but by their customers.

Although there remains a heavy evidential burden on the merchants in proving that direct pass-on did not occur, in our experience, merchants in most sectors do not address the MIF as a specific input cost when setting prices. Therefore, the card schemes should find it difficult to offset their liability significantly, if at all, under the principle of pass-on.

The above issues are expected to play out during 2021, unless the parties settle in the meantime and, in light of this ruling, we expect Visa and Mastercard to continue to settle cases, with hundreds of millions already paid out to European merchants.

Furthermore, the ruling took a shot at the Interchange Fee Regulation (IFR) introduced in the EU in 2015 which capped credit card MIFs at 0.3% and debit card MIFs at 0.2%. In its view, whilst the IFR did improve the functioning of the internal market and likely reduced prices, it should not prevent member states from maintaining or introducing lower caps through national legislation. In other words, when considering whether MIFs are anticompetitive, the fact that the EU has set certain caps already is totally irrelevant.

Without doubt the momentum is now back with the merchant community in their decades-long fight against Visa and Mastercard. Given the pressures nearly all merchants are facing this year, this could be a welcome boost with merchants able to claim back up to six years of interchange fees.

Further commentary on the ruling can be found here and here, and the judgment can be found here.

To find out how Bankhawk is supporting merchants, click here or contact Steve Glover, Head of Payments at Bankhawk at