Morgan Lewis Scores Interchange Fee Litigation Victory in UK Court of Appeal

July 06, 2018

Morgan Lewis has scored a landmark victory in the Court of Appeal for our client Sainsbury’s (a major retail grocer in the United Kingdom) against credit card company Visa.

After an unprecedented 10-day hearing, the Court of Appeal handed down its judgment in three linked appeals on the lawfulness of the default UK multilateral interchange fee (MIF) within the Visa and MasterCard card payment schemes. The Court of Appeal upheld Sainsbury’s claim that the UK MIF charged within the Visa and MasterCard card payment schemes was an unlawful restriction of competition under Article 101 of the Treaty on the Functioning of the European Union and Chapter I of the UK Competition Act 1998.

The finding by the Court of Appeal that the Visa and MasterCard MIFs infringe competition law gives merchants the prospect of a claim for damages against Visa and MasterCard to reimburse the full amount of the unlawful charge, namely the MIF.


The MIF is charged by Visa and MasterCard every time a customer uses a payment card to make a purchase. The MIF is charged by the cardholder’s bank to the merchant’s bank, and is ultimately passed on to the merchant. Under the Visa and MasterCard schemes, merchants’ banks contract with each merchant on the basis that the merchant’s bank will pay the merchant the value of a cardholder’s transaction minus a merchant’s service charge that usually includes (1) the MIF, (2) the scheme fee payable by the merchant’s bank to the relevant scheme, and (3) the merchant’s bank margin. The level of the MIF, which for the relevant period comprised the vast majority of the merchants’ service charge, is agreed between the cardholders’ banks and the merchants’ banks that are members of the respective schemes.

The UK litigation emanates from the European Commission’s investigations into the MasterCard and Visa European Economic Area (EEA) MIF over the past 30 years, resulting in the European Commission’s 2007 infringement decision against MasterCard (which was upheld by the European Courts), the Commitments entered into by Visa to reduce the level of its EEA MIF in 2010 and 2014, the European Commission’s 2015 Interchange Fee Regulation which capped the payment schemes’ EEA MIFs, and ongoing investigations with regard to the payment schemes’ intra-regional MIFs.

Significance of the Decision

The case is the most substantial antitrust appeal in the United Kingdom to date, and the Court of Appeal’s judgment was keenly awaited, especially by the scores of potential claims that depend heavily on the outcome of these lead cases. Moreover, the case turns on points of fundamental importance in competition law damages claims, and is of a much wider significance.

Given the importance of the case, the European Commission, in an unusual move, appeared before the Court to make oral submissions, which in substance supported the merchants’ cases on Article 101(1) and 101(3). The Court made it clear that the banks’ UK MIF arrangements infringed competition law under Article 101(1), and rejected MasterCard’s attempt to justify its MIF in the interests of economic efficiency under Article 101(3). The cases have been remitted to the Competition Appeal Tribunal for a determination as to whether or not there is a level of MIF that may be exempted from the application of competition law.

The decision has been covered by major media outlets, including the FT and the BBC.

Read the Court of Appeal’s judgment and the European Commission’s written observations.


If you have any questions or would like more information on this decision, please contact any of the following Morgan Lewis lawyers:

Frances Murphy
Joanna Christoforou