Sainsbury's Supermarkets Ltd v Mastercard Incorporated & Ors (Rev 1)

In a four-party payment-card scheme, default multilateral interchange fees must be tested against a realistic counterfactual without the default fee, such as settlement at par or a prohibition on ex post pricing. A positive default fee may set a floor under merchant service charges and restrict competition between acquirers. The possible collapse of a particular scheme in competition with another scheme is not part of the article 101(1) ancillary-restraint analysis. Objective necessity asks whether that type of scheme can operate without the restriction. Exemption under article 101(3) requires robust and cogent empirical evidence linking the fee to objective benefits, showing that affected consumers receive a fair share, and proving that the particular fee is indispensable.

Three appeals concerned default multilateral interchange fees charged within the MasterCard and Visa four-party payment-card schemes. The Competition Appeal Tribunal upheld Sainsbury’s claim against MasterCard. In separate Commercial Court proceedings, Popplewell J dismissed claims by Asda, Argos and Morrisons against MasterCard, while Phillips J dismissed Sainsbury’s claim against Visa. The appeals raised the proper article 101(1) counterfactual, bilateral interchange fees, ancillary restraint and the so-called death-spiral argument, exemption under article 101(3), and quantum issues including pass-on. The central questions were whether the default fees restricted competition in the acquiring market and, if so, whether they were objectively necessary or exempt.

The appeals in AAM v MasterCard and Sainsbury’s v Visa were allowed on the article 101(1) issue. MasterCard’s appeal in the CAT case was allowed on the bilateral interchange-fees issue. Declarations were to be made that the relevant agreements restricted competition contrary to article 101(1).

1. The proper counterfactual was a scheme with no default MIF and settlement at par, or an equivalent prohibition on ex post pricing. The MIFs set a floor under merchant service charges and reduced the pressure merchants could exert on acquiring banks. The CJEU’s decision in MasterCard ([2014] 5 CMLR 23) was binding on that analysis.
2. The CAT had insufficient evidence to conclude that substantial bilateral interchange fees would have been agreed in the counterfactual. Its findings on that issue and on the resulting fee levels were set aside.
3. The death-spiral argument was irrelevant to the article 101(1) inquiry. Under the ancillary-restraint doctrine, objective necessity asks whether a four-party payment-card scheme as a type of operation can survive without a default MIF. Competitive effects on the particular scheme belong, if anywhere, under article 101(3). The MasterCard and Visa schemes were materially identical for article 101(1) purposes.
4. Article 101(3) required robust, cogent and empirically supported evidence of a causal link between the MIF and objective benefits. MasterCard had not established that link, had not shown that merchants received a fair share, and could not rely on estimates of pass-through. Business stealing was a predicament for merchants as a whole, not a net benefit.
5. The merchants did not bear the burden of proving a lawful MIF level for damages purposes. That burden lay on the scheme asserting that an alternative fee would have been lawful. The CAT was entitled not to reduce damages for pass-on.

The three cases were remitted to the CAT, so far as possible before the same tribunal, for reconsideration of article 101(3) and quantum. No fresh evidence was permitted except on quantum in the Visa and AAM cases.

1. Court of Appeal (Civil Division) — [2018] EWCA Civ 1536: allowed the AAM and Visa appeals on article 101(1), allowed MasterCard’s CAT appeal on bilateral interchange fees, and remitted all three cases to the CAT.
2. Competition Appeal Tribunal — upheld Sainsbury’s claim against MasterCard and awarded damages.
3. High Court, Commercial Court — Popplewell J dismissed the AAM parties’ claims against MasterCard; Phillips J dismissed Sainsbury’s claim against Visa and later held, hypothetically, that Visa’s MIFs would not have been exempt under article 101(3).