Tesco Stores Ltd & Ors v Mastercard Incorporated & Ors

An illegality defence involving alleged competition-law infringements should not be determined summarily where difficult and developing legal questions depend upon facts requiring disclosure and oral evidence. Whether related companies form a single economic entity is context-specific and requires consideration of their economic, organisational and legal links in relation to the relevant activity.

Membership of such an entity does not necessarily make every constituent company strictly liable for another member’s infringement. Attribution may require decisive influence or some further basis. Whether competition-law conduct is sufficiently criminal or quasi-criminal for ex turpi causa, and whether a claimant bears significant responsibility for the infringement, may likewise require examination of that claimant’s knowledge, conduct and bargaining position.

The claimant retailers sought damages and declarations arising from allegedly excessive multilateral interchange fees imposed through the MasterCard credit-card scheme. They alleged infringements of article 101 TFEU and the Chapter I prohibition in the Competition Act 1998.

The defendant companies applied under CPR rules 3.4(2) and 24.2 for strike-out or summary judgment on the ground of ex turpi causa. They argued that Tesco Bank and the claimants formed a single economic entity; that Tesco Bank participated in the alleged infringement; that its conduct was attributable to the claimants; and that the Tesco group bore significant responsibility for the infringement.

The central question was whether those matters could properly be decided on assumed and presently available facts, or required determination at trial after disclosure and fuller factual investigation.

1. The application was dismissed. The claimants had a real, rather than fanciful, prospect of defeating the proposed ex turpi causa defence. The case raised difficult questions in a developing area of law whose resolution could be affected by facts available only after disclosure, possible third-party disclosure and oral evidence. It was therefore unsuitable for strike-out or summary judgment: paras [69]–[71], [82].
2. Whether Tesco Bank and the claimants formed a single economic entity could not be decided on the existing material. The inquiry required consideration, case by case, of a wide range of economic, organisational and legal links. It was realistically arguable that the entity had to be delineated by reference to the particular activity or infringement, rather than equated with the corporate group as a whole. That could place individual retail subsidiaries outside the relevant entity: paras [72]–[75].
3. Even if the claimants and Tesco Bank formed one economic entity, it remained realistically arguable that Tesco Bank’s alleged infringement could not be imputed horizontally to sister or cousin companies merely because they belonged to that entity. The authorities supported an argument that responsibility was not strict and required something further, potentially decisive influence. The evidence did not address the position of each claimant separately: paras [76]–[77].
4. The defendants could not establish summarily that Tesco Bank was a party to the post-2008 infringement. Changes in the MasterCard arrangements and undisclosed dealings between Tesco Bank and the defendants could affect that issue: para [79].
5. It was more than merely arguable that competition-law conduct fell within the quasi-criminal category relevant to ex turpi causa only where intentional or negligent conduct was established. Each claimant’s knowledge might therefore require determination. This was another issue for trial: para [80].
6. Whether a claimant bore significant responsibility for a distortion of competition was fact-specific. The contention that responsibility should be assessed by reference to the particular contracting claimant, rather than across the undertaking, had a real prospect of success. The parties’ conduct, bargaining positions and ability to avoid the loss required fuller evidence: para [81].

not stated in the judgment.