FML Timeline: Asda Stores Ltd v Mastercard

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An action was brought against MasterCard by a number of high street retailers in relation to multilateral interchange fees (MIFs) that Mastercard charges on credit and debit card transactions. MIFs are the fees paid by the retailer’s bank to the customer’s bank for processing credit and debit card transactions. These fees are set by the credit or debit card scheme, i.e. MasterCard. The retailer’s bank deducts the cost of the MIF from the price that the retailer receives from the transaction with the customer, so the MIF is ultimately borne by the retailer.

The retailers brought an action on the grounds that MasterCard had unlawfully restricted competition between banks, meaning that the fees that the retailers paid to the banks were too high. They claimed that this was a breach of Article 101 of TFEU which prohibits certain actions which may affect trade between Member States and effect competition within the internal market.

Decision

The High Court considered two key questions. Firstly, the High Court considered whether the MIFs restricted competition between the retailers’ banks. It was held that the MIFs, taken in isolation, do restrict competition because they set a floor on the level of the fees that banks can charge to retailers. This floor prevents the banks from being able to compete for the retailers’ business by offering fees below the floor.

Secondly, the High Court considered whether such a restriction was necessary under the “ancillary restrictions” doctrine. The doctrine applies where there are restrictions on the parties to an agreement but when taken as a whole the agreement is neutral or positive in its competitive effect, and the restrictions are necessary for the agreement to function properly. It was held that the MIFs were necessary for MasterCard to function properly: if, hypothetically speaking, MasterCard abolished MIFs, it would go out of business because card issuing banks would switch from MasterCard to VISA in order to maximise their revenues. It was therefore held that the MIFs were not in breach of Article 101 of TFEU.

Noteworthy and Novel points

This judgment departs from recent rulings against MasterCard in similar cases. On 11 September 2014, the European Court of Justice dismissed an appeal from MasterCard in relation to a ruling from the European Commission which found that MasterCard’s MIFs breached Article 101 of TFEU. In addition, in July 2014 the Competition Appeal Tribunal ordered MasterCard to pay damages to Sainsbury’s for breach of Article 101 of TFEU in relation to anti-competitive MIFs.

The High Court held that it was not bound by these previous findings. The High Court found that, in this case, the facts and the state of the market were both very different.