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Interchange fees - appeal made to bring proceedings against Mastercard for unprecedented amount

In a landmark case that unsuccessfully brought proceedings against Mastercard, an appeal has recently been made that could lead to an unprecendented amount claimed.

The proceedings were based on EEA multilateral interchange fees.

Interchange fees are paid by merchant acquirers to card issuers as a percentage of each and every credit and debit card transaction. The fees are estimated at some £2 billion per year in the UK alone. Acquirers pass these costs onto their merchants and a number of recent cases have sought to determine whether this results inhigh prices for consumers.  

The EC decisions

Between 2007 and 2015, the European Commission made a series of decisions which held that interchange fees (applied across various jurisdictions) were anti-competitive and increased merchants' costs. As a result, both MasterCard and Visa (via the Visa Commitments) reduced their cross border interchange fees.

Merchant claims

Once the EC established that some interchange fees had historically been unreasonably high, a range of merchants took the logical next step and sought recoveries from the card schemes. These cases played out from 2015 to 2016, resulting in judgments in favour of both the merchants and the card schemes in the first instance. Appeals are in the pipeline. While some of these cases have touched on the impact that interchange fees have on consumer prices, none have successfully convinced a court that these fees result in increased prices on the high street.

Consumer claim

On the other side of the coin, in mid-2016, Walter Merricks (former chief Financial Ombudsman) applied for a collective proceedings order permitting him to bring a class action under the Consumer Rights Act 2015 (the CRA), on behalf of UK consumers (Case 1266/7/7/16 Walter Hugh Merricks CBE v MasterCard Inc and Others).

Merricks alleged that the interchange fees applied by MasterCard to cross border transactions between 1992 and 2008 (which the EC had already decided were too high and anti-competitive) resulted in increased costs to UK consumers. He claimed £19 billion. Merricks' key challenge was to establish the way in which damages should be distributed to the class members.

In July 2017, the Competition Appeal Tribunal (the Tribunal) decided that the claim was not suitable for collective proceedings because Merricks had not provided sufficient evidence with which to support his proposed method of calculating the damages that would be awarded to each class member. The governing principle for breach of competition law is restoration and the Tribunal was not convinced that Merricks could achieve this resolution.


Mr Merricks argues that the Tribunal did not fully consider the intention behind and policy for claims under the CRA. He says that if he can establish the damages caused by MasterCard to UK Consumers as a class, he ought not to be prevented from bringing his claim purely because he is unable to calculate the loss suffered by each individual at this stage.

Merricks argues that the Tribunal's approach frustrates the purpose of the CRA and enables large institutions to avoid liability, despite the EC's findings.
Solicitors representing Merricks have confirmed that they are seeking to appeal the Tribunal's decision.  An appeal under the Tribunal's collective actions, although permitted, would be new, untested, territory.  It is unclear at this stage whether an appeal would be heard by the Court of Appeal or the Administrative Court (for judicial review). 

One of the main purposes for collective actions is to make it easier for consumers to bring competition law claims.  It is the first judgment of this type and there are significant public policy issues to be considered.  On this basis, Merricks' solicitors have said they are confident that the claim will be successful, regardless of the procedural route.

If Merricks is permitted to appeal, the procedural route will at least provide future claimants with an indication of how collective proceedings will be dealt with going forward.   

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.


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