An expensive MIFtake?

An expensive MIFtake?

It has been decided that those dreaded credit and debit card fees known as “MIFs” are unlawful. So, will there be a chance for merchants to claim damages?

On 4 July 2018, the Court of Appeal handed down a landmark judgment in three associated cases against MasterCard and Visa (“the Card Companies/Company”) commenced by various retailers including Sainsbury’s, Asda and Argos (“the Retailers”).

The Judgment is a crucial development for any retailers and/or companies that have been required to pay interchange fees on customer’s card transactions, who may now be entitled to claim damages.

The cases related to default multilateral interchange fees (“MIF(s)”) which are ultimately passed on to retailers when customers use credit or debit cards. Interchange fees became regulated under EU law and caps were implemented in the UK from December 2015. There is now a ceiling of 0.3% on credit card transactions and 0.2% on debit card transactions in respect of consumer transactions. However, prior to this there was no upper limit and interchange fees were in some cases up to 1%.

In the present case, the Retailers argued that setting default MIFs was in breach of EU competition law.

The Court upheld the appeal, finding that:

  1. A default MIF did infringe EU competition law

The test was whether there was a ‘likelihood’ that the scheme rules restricted competition. The Card Companies relied on the fact that the banks of the customers and Retailers agreed to be bound by the scheme rules. This was not sufficient.

The Card Companies set default MIFs that were payable if an alternative fee was not negotiated and agreed. There was no evidence to suggest that the same level of fee would be agreed if default MIFs were not imposed.

  1. A default MIF was not essential to the ‘survival’ of the MasterCard and Visa payment schemes

The Card Companies argued that they would enter into a “death spiral” if prohibited from imposing default MIFs. They each argued that these correlated with additional benefits for consumer cardholders and that if they were prohibited from setting high default MIFs they would lose business to rival schemes.

The Court found that a default MIF was not essential as both Card Companies would be equally restricted.

  1. The default MIFs did not fall within any exemptions allowable under EU competition law

The Card Companies argued that default MIFs fell within legislation which exempted the agreements. One of the requirements being that consumers received a fair share of the resulting benefits.

The Court noted that there must be a causal link between the default MIF and the resulting benefits for the consumers. This must be supported by facts, evidence, data and empirical analysis not just theory.

Whilst each of the cases were considered separately, the Court noted the key disadvantages of default MIFs. Customers and Retailers do not receive any of the income generated from default MIFs. Any switching in the market would likely be from one Card Company to another and therefore was of no overall benefit.


The Court of Appeal ordered that the three cases be remitted to the Competition Appeal Tribunal (CAT). The Court noted that it “will be able to use its specialist expertise to deal with all the remaining matters in accordance with the guidance contained in this judgment.” The CAT will reconsider the application of exemptions, will assess what a fair level of default MIF would be and will also assess the damages due to the Retailers.  The Court has made clear that the decision to remit the cases to the CAT does not allow for a “retrial”. The CAT will not hear new evidence but each party will be able to rely on all available evidence in respect of both Card Companies schemes to ensure that the decisions reached are consistent. The Court of Appeal did not consider limitation issues in the judgment and this will be an important factor for businesses to consider.

It remains to be seen whether the floodgates will open to an inundation of claims against card issuers. We will provide further updates on this matter as it progresses in the CAT and comment on the reaction from the business world.

If you would like to discuss any aspect of this article please contact Jade Brooks (01494 478 623) or Sally Morse (01494 478 604).