Class action claim for damages sees ‘big win’ against Mastercard and Visa

Lawyers pursuing a class action claim against Mastercard and Visa for repayment of fees on commercial card payments won a significant ruling in the Competition Appeal Tribunal (CAT) this month.

 

In a judgment on whether the fees are ’passed on’ by acquirers to merchants and by merchants to customers, the Tribunal ruled the fees are passed on 100% to larger merchants and 85% to smaller and that, with some exceptions, merchants don’t pass on the fees to customers.

 

In the case of travel retailers, the Tribunal found less than half the fees (47.5%) are passed on to customers meaning travel merchants incur significant charges which have already been ruled to be preventing, restricting or distorting competition and are therefore unlawful.

 

The ruling followed two trials in a complex set of proceedings against Mastercard and Visa seeking repayment of the multilateral interchange fees (MIFs) which the card schemes require merchants to pay ‘acquiring’ banks in return for processing card payments. 

 

One trial considered the class action claimants’ allegation that the fees are passed on to retailers in higher merchant service charges, and a second considered a claim by the card schemes that retailers pass on the fees to customers “by way of higher prices”.

 

The CAT has already ruled that the schemes “prevent, restrict or distort competition”, issuing a judgment in June last year following a trial in March. The latest proceedings were to assess the potential damages.

 

The Tribunal found 100% ‘acquirer pass-on’ in contracts with larger merchants and 85% in standard contracts mostly applied to smaller merchants, with none of the fees passed on to consumers in most cases but with travel agents and online intermediaries an exception in passing on 47.5% of the fees.

 

A further trial, scheduled for late next year, will consider whether the potential damages are mitigated by any benefits from the fees which outweigh the harm.

 

Lawyers estimate the card schemes owe more than £4 billion to UK travel, hospitality and retail businesses.

 

Mastercard and Visa have sought permission to appeal the initial judgment, and the latest Tribunal ruling noted: “There remain many more issues to resolve in this complex litigation.” 

 

About 600 merchant claimant groups have brought claims against the card schemes which date back to June 2016. Any damages will be payable from that date up to a final judgment or settlement.

 

Stephen Allen, former head of Portman Travel and director of the class-representative companies bringing the claim, welcomed the judgment saying: “It’s a big win. The schemes operated by Mastercard and Visa owe damages to British businesses."

 

He told Travel Weekly: “There is a still a fair way to go but we believe we’ll secure justice for a lot of businesses.”

 

Jeremy Robinson, competition litigation partner at law firm Harcus Parker which is pursuing the claim, said: "Mastercard and Visa have caused substantial loss. This judgment brings closer the day when the schemes will have to do right by British businesses of all sizes.

 

“The schemes have the opportunity to end this process now. We urge them to come to the table.”

 

All businesses which accepted card payments worth up to £100 million a year are automatically included in the claim. Those taking card payments worth more than £100 million had to opt in.

For more information go to: creditdebitcardclaim.co.uk