Before we move on to today’s news, I wanted to highlight that I have rebranded my newsletter. I thought that Clear Law was not very unique and the name had to change; therefore, I changed it to Drafted and Delivered.
CAT rules Visa and Mastercard INTERCHANGE FEES violated Competition Law
WHAT IS HAPPENING
The UK’s Competition Appeal Tribunal (CAT) has held that multilateral fees (MIFs) charged by Visa and Mastercard to retailers are infringements of UK and EU competition law, both before and after regulatory intervention under the Interchange Fee Regulation (IFR).
This landmark ruling marks the first judicial finding that such fees are unlawful “by object”, as opposed to simply “by effect” — a significant escalation in legal treatment of these widely used fee structures.
What is Interchange Fees?
Interchange fees are transaction fees charged between banks for processing credit and debit card payments. When a customer makes a purchase using a card, the business's acquiring bank pays the interchange fees to the cardholder's issuing bank.
Card networks set interchange fees, which is typically a percentage of a transaction amount plus a fixed fee. The interchange fee depends on various factors, including the type of card used (credit or debit), the type of transaction (in person or online), the industry of the business, and the region where the transaction occurs.
Some jurisdictions have regulated interchange fees because they can affect businesses' costs and potentially affect customer prices. Regulations and negotiations various stakeholders can influences the structure and impact of interchange fees in different regions. WHY THIS RULING IS SIGNIFICANT
First “By Object” Finding: For the first time, a UK tribunal has concluded that interchange fees were inherently anti-competitive, meaning their very structure and purpose restrict competition without needing to assess actual market impact.
Impact Despite Regulation: The CAT held that regulatory caps (e.g. under the IFR) do not cure the anti-competitive nature of MIFs. The default position of the card schemes remains restrictive.
Wider Legal Implications: The decision paves the way for significant follow-on damages claims and sets a precedent that may influence regulatory enforcement and litigation across multiple jurisdictions.
THE KEY PLAYERS
Claimant Groups: Representing over 2,100 retailers, split between:
Scott + Scott: Leading the case to trial and securing the judgment.
Stephenson Harwood: Settled in 2024 after leading the early stages of litigation.
Defendants:
Visa: Advised by Linklaters and Milbank, instructed Brian Kennelly KC (Blackstone Chambers).
Mastercard: Advised by Jones Day, instructed Sonia Tolaney KC and Matthew Cook KC (One Essex Court).
The Tribunal: Included Mr Justice Marcus Smith, former President of the CAT.
PRACTICE AREAS IN ACTION
UK and EU Competition Law
Regulatory and Financial Services
Commercial Dispute Resolution
Group Litigation
Retail and Payments Regulation
LEGAL AND COMMERCIAL ISSUES
Infringement by Object: Do fixes MIFs constitute a hardcore restriction under Article 101 TFEU and the Chapter I prohibition of the Competition Act 1998?
Effect of Regulation: Whether caps introduced by the IFR negate or merely limit the anti-competitive effects.
Market Definition & Foreclosure: How MIFs affect merchant pricing and consumer choice in the payments market.
Justification and Objective necessity: Whether the schemes’ justification (security, convenience, innovation) holds up in competition law terms.
Pass-on and Overcharge: In future trials, the Tribunal will examine pass-on arguments - whether retailers passed excessive fees to consumers.
TRAINEES’ TAKEAWAYS - WHAT DO TRAINEES DO ON A CASE LIKE THIS?
As a trainee involved in similar high-value competition litigation, your tasks may include:
Legal Research: Analysing precedents such as the Supreme Court’s 2020 Sainsbury’s v Mastercard judgment, and preparing research notes on EU/UK competition frameworks.
Trial Preparation: Preparing bundles, reviewing pleadings, witness statements, and assisting in drafting skeleton arguments.
Disclosure: Managing and reviewing documents for relevance and privilege, supporting eDisclosure processes.
Expert Evidence: Coordinating economic expert instructions and comparing models used to assess market impact on counterfactuals.
Client contact and correspondence: Drafting updates and instructions, attending case management conferences, and liaising with counsel.
Settlement Support: Assisting with drafting settlement agreements and ensuring appropriate confidentiality undertakings are observed.
FINAL THOUGHTS
This case underscores that regulation does not necessarily immunise conduct from antitrust scrutiny. It demonstrates interchange arrangements - even those that are capped - can still breach competition law by their very design.
For aspiring solicitors, particularly those with an interest in competition, commercial disputes, or financial regulations, this case exemplifies the kind of multi-jurisdictional, precedent-setting litigation that can define a practice area - and your early legal career.
Legal Lingo
Infringement by Object:
A type of competition law breach where the conduct is deemed inherently anti-competitive, such that its actual effects need not be proven (Article 101 (1) TFEU/ section 2 Competition Act 1998.
This is known as the most serious type of restriction - e.g. price fixing, market sharing.
Infringement by Effect:
When conduct is not automatically illegal, but is shown to have actual anti-competitive effects on the market. Previously, the only way MIFs had been found unlawful.
AND MORE…
Inspired by LittleLaw, this provides the ability to think about every aspect of the Deal or Dispute - https://littlelaw.co.uk/
Want to learn DRIVING - https://linktr.ee/meerdrivinginstructor
New to Clear? Don’t Miss Out! 📬 |
Subscribe now to stay in the loop with the latest commercial insights and top headlines delivered straight to your inbox. Stay informed, stay ahead! 🌟 |
Thank you for reading 😄