Asda Stores v Mastercard judgment on interchange fees

Popplewell J in the High Court recently handed down judgment in Asda Stores Ltd & ors v Mastercard Inc [2017] EWHC 93 (Comm). The issue was whether multilateral interchange fees (“MIFs”) charged by Mastercard (the network operator) were anti-competitive.

Mastercard charged MIFs to both card issuers and acquirers for participating in its payment scheme and having payments transferred between the respective banks of the cardholders and merchants. In reality the MIFs were paid (indirectly) by the merchants. Acquirers charged merchants a ‘merchant service charge’ (“MSC”). In practice the MSC was never lower than the MIF payable by the acquirers, otherwise the acquirers would suffer a loss. For this reason the MIFs imposed a floor on the level of the MSC imposed by acquirers.

The claimant merchants (various high street retailers) alleged that Mastercard had unlawfully restricted competition between acquirers and merchants, meaning that the merchants had had to pay too much to accept network cards. They alleged a breach of art 101 of the Treaty on the Functioning of the EU (“the TFEU”).

The High Court agreed that by effectively imposing a floor on the level of the MSC imposed by acquirers, the MIFs did restrict competition in the acquiring market. Such a floor restricted competition because it interfered with the ability of acquirers to compete for merchants’ business by offering MSCs below such floor

However, it was held that the MIFs did not infringe TFEU art.101, but fell outside its scope under the “ancillary restraint” doctrine. The “ancillary restraint” doctrine arose where there was a main operation which was neutral or pro-competitive, but had as one of its constituent parts something that would be a restraint on the autonomy of the parties if considered in isolation. Here, the MIFs were objectively necessary to the main operation of Mastercard’s scheme as a whole, which was neutral or positive in its competitive effect. Card issuers derived revenue from the MIFs. In a hypothetical counterfactual world where Mastercard set its MIFs at zero, but Visa MIFs were left unconstrained, the Mastercard scheme would collapse and issuers would switch to issuing cards from Visa, or another rival card operator.