19 June 2020

Morgan Lewis, Mishcon and Stewarts Law celebrate landmark UK Supreme Court credit card fees ruling

The Supreme Court on Parliament Square, Westminster

Ruling paves the way for damages that could run into billions of pounds

Trio advise retailers in cartel claim against MasterCard and Visa that could lead to billions of pounds in damages

Morgan Lewis & Bockius was celebrating this week — along with UK firms Mishcon de Reya and Stewarts Law — after a landmark UK Supreme Court victory by their retailing clients against fees charged by MasterCard and Visa that could unlock ‘billions in damages’.

One of the largest ever UK cartel damages claims reached a key stage when the UK Supreme Court held that interchange fees set by the credit card providers, advised by Jones Day, Milbank and Linklaters, were unlawful under EU law. 

The case involved three proceedings, two by UK supermarket Sainsbury’s — represented by Morgan Lewis and Mishcon — and one brought by Asda (which is owned by Walmart), Argos and WM Morrison, advised by Stewarts Law.

Frances Murphy, of Morgan Lewis, who advised Sainsbury’s in its claim against Visa, said the judgment "will have significant implications, including potentially billions in damages with retailers lined up to be compensated for the overcharges". 

In a unanimous judgment, the Supreme Court dismissed four of the five grounds for appeal made by the defendants, upholding only one claim, which was over how much precision should be used in calculating any loss incurred by the retailers, where it held that the applicable principles should remain broad, in line with current law.

Having heard from the European Commission, in one of its last interventions before Brexit, the court held that the fees had fixed a minimum price floor, which merchants were unable to negotiate down from, and ruled that past EU decisions were binding on the English courts.

The court also rejected a decision by the Court of Appeal to remit the claims back to the Competition Appeal Tribunal (CAT), to decide whether MasterCard’s interchange fees were exempt from competition law.

A rehearing, said Lord Hamblen, would offend ‘against the strong principle of public policy and justice that there should be finality in litigation’.

The court remitted all cases to be heard by the CAT on the issue of damages, with Sainsbury’s required to make further legal argument on exemptions, most likely in 2021.   

MasterCard noted further proceedings were ongoing, while Visa said it was disappointed with the decision. Jones Day declined comment.

Rob Murray, of Mishcon de Reya, acting for Sainsbury’s against Mastercard, said: “This judgment not only confirms that the setting of [such fees] is a restriction of competition, but it also sets out requirements for any possible exemption, and the test for whether any unlawful payment is pass-on to another party which may then have a claim."

Kate Pollock, of Stewarts Law said her clients’ claims could “now proceed to trial on the issue of the quantum of damages [and] a swift resolution of the matter without further delay".

Louise Trayhurn, of litigation funder, Legis Finance, said claimants and funders would be comforted by the Supreme Court’s approach.

She said: “This much-anticipated judgment provides clarification on the interaction of European courts with the courts of England and Wales, solidifies legal tests regarding aspects of competition law as well as having an impact on future collective damages actions on behalf of UK consumers under the ‘opt out’ regime.” 

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