Asda Stores Ld & Ors v Mastercard Incorporated & Ors

A multilateral interchange fee may restrict acquiring competition by setting a floor below which merchant service charges cannot fall. The assessment requires a realistic counterfactual that likely would arise without the fee. However, the fee may fall outside Article 101(1) as an ancillary restraint if the scheme could not survive without it, taking account of competition from rival payment schemes. Article 101(3) requires direct, quantifiable benefits, a fair share for affected merchants, indispensability and preservation of competition. Profits retained by parties to the restriction are not relevant benefits. The court concluded that the UK and Irish fees were below the exemptible levels, while the earliest EEA debit fees exceeded them.

Twelve major retailers brought claims against MasterCard for damages and declarations arising from credit and debit card multilateral interchange fees applied in the UK, Ireland and intra-EEA transactions. The claims alleged infringements of Article 101 TFEU, Article 53 of the EEA Agreement, the Competition Act 1998 and the Irish Competition Act 2002.

The Phase 1 trial addressed liability, exemption under Article 101(3), the appropriate counterfactual and the level of any lawful fee. The court also considered the separate Sainsbury’s Supermarkets Ltd proceedings and the CAT decision reported at [2016] CAT 11.

1. Article 101(1). A MIF ordinarily restricts competition on the acquiring market because it is a cost passed through to merchants and creates a floor for merchant service charges. The relevant market was the acquiring market alone, following the General Court decision in Groupement des Cartes Bancaires (CB) v Commission (Case T-491/07 RENV). Effects on issuing and inter-system markets could be considered under Article 101(3).
2. Counterfactuals and ancillary restraint. A restriction counterfactual had to be realistic and likely to arise. Pure ex post bilaterals, voluntary or mandatory bilateral agreements and unspecified alternative restructurings were unrealistic. A zero MIF, or no MIF with a prohibition on ex post pricing, was the only realistic alternative identified. The ancillary restraint counterfactual was subject to the same realism requirement.
3. Death spiral. Competition from Visa and Amex was legally relevant. The court was not persuaded that the schemes were materially identical for Article 101(3) purposes, so Visa’s actual MIFs were used in the counterfactual. The evidence established that a zero MIF would have caused the MasterCard four-party scheme to collapse in the UK and Ireland. The MIFs were therefore objectively necessary to the scheme and were not restrictive by comparison with that counterfactual. The same conclusion would follow from a differential of about 0.2%.
4. Article 101(3). Relevant benefits had to be directly caused by the MIF. Benefits could include avoided payment costs, competitive advantages, online sales, payment guarantees, credit functionality and increased or earlier sales. Profits retained by issuers were excluded from the relevant benefit pool. The Merchant Indifference Test was used as a starting point, adjusted for other merchant benefits, issuer pass-through, transaction values and acquiring margins.
5. The court assessed the exemptible weighted-average levels as UK credit 1.11%, UK debit 0.42%, Irish credit 1.10%, Irish debit 0.43%, EEA credit 1.41% and EEA debit 0.42%. The MIFs as set were below the exempt and exemptible levels, save for EEA debit fees during the earliest period before June 2008. The Phase 1 issues were answered in accordance with the judgment; damages remained for Phase 2.