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A broad axe falls upon MasterCard and Visa as Supreme Court hands down milestone judgment in interchange litigation


In the recent landmark decision of Sainsbury's v MasterCard,1 the Supreme Court confirmed that MasterCard and Visa's multilateral interchange fees ("MIFs") infringed Article 101(1) of the Treaty on the Functioning of the European Union ("TFEU"). The judgment also establishes the legal test that MasterCard and Visa must satisfy to be exempt under Article 101(3) TFEU, as well as the legal test for establishing pass-on.


The long-running litigation concerns MIFs charged to merchants under the rules of MasterCard and Visa's payment card schemes (the "Schemes"). Merchants are unable to negotiate the MIF portion of the merchant service charge ("MSC") which they pay to acquiring banks for the transfer of funds under the Schemes. In 2007 and 2014, the General Court and Court of Justice (respectively) (the "CJEU Decision") found that MIFs set a MSC price floor contrary to Article 101(1) TFEU.2

The Supreme Court's decision marks the endpoint of three sets of proceedings: Sainsbury's v MasterCard (the "MasterCard Sainsbury's Proceedings"),3 Sainsbury's v Visa (the "Visa Sainsbury's Proceedings"),4 and Asda, Argos and Morrisons ("AAM") v MasterCard (the "AAM Proceedings").5 The MasterCard Sainsbury's Proceedings were heard in the Competition Appeal Tribunal (the "CAT") in 2016. The CAT found that MasterCard's UK MIFs restricted competition by effect and awarded Sainsbury's damages. The AAM Proceedings were heard in the Commercial Court, where it was instead held that while MasterCard's UK and Irish MIFs restricted competition in the acquiring market, the effect was that they did not infringe Article 101(1) TFEU. The Commercial Court also found that, in any event, MIFs are exempt under article 101(3) TFEU and the claim should be remitted to the CAT. The Visa Sainsbury's Proceedings were also heard in the Commercial Court, where it was found that Visa's UK MIFs did not restrict competition in the acquiring market, dismissing the claim.

The three cases were conjoined on appeal to the Court of Appeal following the irreconcilable judgments in the first instance. On 4 July 2018, the Court of Appeal handed down judgment in favour of the merchants but remitted all three sets of proceedings to the CAT for reconsideration. MasterCard and Visa were granted permission to appeal to the Supreme Court in November 2018 on all issues, and AAM were give permission to cross-appeal the order for remittal to the CAT.

At the four-day hearing in January 2020, the Supreme Court had to consider five grounds of appeal:

i. Did the Court of Appeal err in law in finding that there was a restriction of competition (“the Restriction Issue”)

ii. Did the Court of Appeal find that MasterCard and Visa were required to satisfy a more onerous evidential standard than that normally applicable in civil litigation in order to establish that MIFs are exempt pursuant to Article 101(3) TFEU, and did it err in law doing so (“the Standard of Proof Issue”)?

iii. Did the Court of Appeal err in law in finding that in order to show that consumers receive a fair share of the benefits generated by MIFs for the purpose of Article 101(3) TFEU, Visa was required to prove that the benefits provided to merchants as a result of the MIFs outweighed the costs arising from MIFs, without taking any account of the benefits received by cardholders as a result of MIFs (“the Fair Share Issue”)?

iv. Did the Court of Appeal find, and if so, did it err in law in finding, that a defendant must prove the exact amount of loss mitigated in order to reduce damages? (“the Broad Axe Issue”)?

v. Did the Court of Appeal err in law in remitting the AAM proceedings for reconsideration in relation to exemption under Article 101(3) TFEU (“the Remission Issue”)?

The Restriction Issue

In determining whether the Court of Appeal was correct to find that MasterCard and Visa's MIFs infringed Article 101(1) TFEU, the Supreme Court considered whether the CJEU Decision is binding on it.6 It found that it is binding, reasoning that "the essential factual basis" of the CJEU Decision, i.e. a non-negotiable collective agreement that has the effect of setting a minimum price floor for the MSC,7 "is mirrored in these appeals".8 The Supreme Court further held that it would have followed the CJEU Decision even if it was not binding.9 Agreeing with the CJEU, the Supreme Court found that MIFs are “immunised from competitive bargaining".10

The Supreme Court thus dismissed this ground of Appeal.11

The Standard of Proof Issue

In order to rely on Article 101(3) TFEU's exemption, four limbs must be satisfied.12 The Court of Appeal held that this can be achieved only through "robust and cogent evidence…proved by facts and empirical data".13 MasterCard and Visa appealed, reasoning that these standards are "more onerous… than that under the normal domestic civil standard of proof".14 The Supreme Court, agreeing with the findings of the Court of Appeal and the Commission (which intervened to support Sainsbury's and AAM), concluded that Article 101(3) TFEU is founded on the notion that certain "efficiencies and benefits arising from the [anti-competitive] conduct…justify exemption from the prohibition", and balancing the "negative effect on competition" against the benefits necessitates a "complex assessment" which is "inherently empirical".15 While the standard of proof is a matter of domestic law, "the nature of the evidence… must take account of the substantive requirements of Article 101(3)".16

The Supreme Court thus dismissed this ground of Appeal.17

The Fair Share Issue

One of the four limbs that must be satisfied to rely on Article 101(3) TFEU is that those negatively impacted by the anti-competitive behaviour receive a fair share of the benefits resulting from it.18 The Court of Appeal found that to satisfy this limb, MasterCard and Visa cannot rely on the benefits received by customers as a result of MIFs (such as loyalty points and offers); rather MasterCard and Visa must prove that merchants received a fair share of the benefits. The Supreme Court agreed. It found that in circumstances where there is a "two-sided market",19 e.g. issuers competing against each other on one side and acquirers competing against each other on the other, the benefits to one side cannot be used to balance the harm caused to the other.20 As merchants were not fully compensated for the harm caused by MIFs (notwithstanding the benefits received by cardholders), the fair share test is not satisfied. In reaching this conclusion, the Supreme Court favoured Advocate General Mengozzi's Opinion that "it is necessary that the fair share of the profit resulting from the advantages arising from the agreement… be reserved for the direct consumers of the services provided on the market on which the restrictive effects for competition are produced", which had been issued in advance of the CJEU Decision.21

The Supreme Court thus dismissed this ground of Appeal.22

The Broad Axe Issue

The key issue the Supreme Court considered under this ground of appeal was the degree of precision that is required in the quantification of mitigation of loss where a defendant to a claim for damages arising out of a breach of competition law asserts that the claimant has mitigated its loss through the passing an overcharge on to its customers.

The Supreme Court began by providing helpful clarity on how loss should be measured in different circumstances. The Supreme Court highlighted the following principal options to "sophisticated retailers" in response to the imposition of a cost under the Schemes:

i. do nothing in response to the increased cost and thereby suffer a corresponding reduction of profits or an enhanced loss;

ii. respond by reducing discretionary expenditure on its business such as by reducing its marketing and advertising budget or restricting its capital expenditure;

iii. reduce its costs by negotiation with its many suppliers; or

iv. can pass on the costs by increasing the prices which it charges its customers.23

Where a merchant opted for (i) or (ii), its loss will be measured by the amount it paid on the overcharge. If a merchant opted for (iii), (iv) or a combination of the two, the compensatory principle mandates the court to take account of the effect of these actions and as such there will be a question of mitigation of loss.

The Supreme Court then considered the burden of proof in relation to mitigation of loss. Visa and MasterCard argued that the burden is on a claimant to prove its loss, including any pass-on. Sainsbury's and AAM submitted that, given they had stated a prima facie case of their loss, the burden of proof falls on Visa and MasterCard.24 The Supreme Court sided with the merchants. It reasoned that requiring a claimant to prove the effect of the overcharge on its overall profits would create an "insurmountable burden in establishing its claim" which would likely offend the principle of effectiveness.25 The Supreme Court further noted that the focus on the claimant's profits that would be required should the Supreme Court have agreed with MasterCard and Visa on this point would "result in it being undercompensated if the overcharge had caused it to forgo discretionary expenditure to develop its business which did not promptly enhance its profits".26

The Supreme Court finally moved onto the precision required when quantifying loss. By way of brief overview, the burden of proof to prima facie prove it has suffered loss and the quantum of such loss rests on the claimant. In cases where the quantum of loss cannot be proved with precision, the court may adopt a "broad axe" approach, i.e. a more general, high-level approach to quantifying loss. In the Mastercard Sainsbury's proceedings, the Court of Appeal held that the "broad axe" principle does not apply to the burden on the defendant to establish the amount of pass-on by the claimant.27 In considering this approach the Supreme Court found that the Court of Appeal distinguished the degree of precision required of a defendant from that required of a claimant.

In assessing whether the Court of Appeal was correct in adopting the above approach, the Supreme Court noted that cases should be dealt with at an appropriate cost. This means that "parties may have to forgo precision" if the cost of obtaining accurate figures is disproportionate.28 In accordance with the compensatory principle and the principle of proportionality, the Supreme Court found that "the law does not require unreasonable precision in the proof of the amount of the prima facie loss which the merchants have passed on to suppliers and customers." The Supreme Court therefore concluded that "it is logical that the power to estimate the effects of passing-on applies equally when pass-on is used as a sword by a claimant or as a shield by a defendant".29

The appeal thus succeeded on this issue.30

The Remission Issue

The cross-appeal related only to the AAM Proceedings.31 The Court of Appeal held that MasterCard's claim in the CAT for exemption under Article 101(3) TFEU should have been dismissed, and as such remitted the proceedings back to the CAT. The Supreme Court upheld AAM's appeal, finding that remittance would effectively re-open the issue and offend against the principle of finality of litigation.32


1 Sainsbury's Supermarkets Ltd and Others v MasterCard Incorporated and Others [2020] UKSC 24.

2 MasterCard Inc v European Commission (Case C-382/12 P) [2014] 5 CMLR 23.

3 Sainsbury's Supermarkets Ltd v MasterCard Incorporated and Others [2016] CAT 11.

4 Sainsbury's Supermarkets Ltd v Visa Europe Services LCC [2017] EWHC 3047 (Comm).

5 Asda Stores Ltd v MasterCard Incorporated [2017] EWHC 93 (comm).

6 Ibid 1, [49]-[94].

7 Ibid 1, [93] (i)-(iii); see also [93] (v) and (vi) in relation to the counterfactual.

8 Ibid 1, [93].

9 Ibid 1, [95]-[104].

10 Ibid 1, [100].

11 Ibid 1, [105].

12 Conduct must contribute "to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question", Article 101(3) TFEU.

13 Ibid 1, [106].

14 Ibid 1, [106].

15 Ibid 1, [116].

16 Ibid.

17 Ibid 1, [138].

18 Article 101(3) TFEU.

19 As defined at ibid 1, [15].

20 Ibid 1, [166].

21 Ibid 1, [157]; see also General Mengozzi's Opinion at

22 Ibid 1, [171].

23 Ibid 1, [205]

24 Ibid 1, [207].

25 Ibid 1, [209].

26 Ibid 1, [210].

27 Ibid 3, [331]; Ibid 1, [176].

28 Ibid 1, [217].

29 Ibid 1, [224].

30 Ibid 1, [226].

31 Ibid 1, [227]

32 Ibid 1, [240].

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