Summary: The Competition Appeal Tribunal has ruled, in the UK’s first stand-alone damages judgment, that MasterCard’s restrictions on interchange fees between 2006 and 2015 were a breach of competition law. MasterCard must now pay Sainsbury’s over £68m within 28 days. Strikingly, the CAT ruled that the pass-on defence was not available to MasterCard. This is the first time a UK court has given judgment on this critical issue.

The Competition Appeal Tribunal (“CAT”) recently handed down judgment in favour of Sainsbury’s against MasterCard, in the first stand-alone damages claim to reach judgment in the UK courts.  The CAT ruled that MasterCard’s restrictions on interchange fees set between December 2006 and December 2015 were a breach of competition law. Under the ruling, MasterCard must pay Sainsbury’s over £68m (plus interest) within 28 days. Strikingly, the CAT ruled that the pass-on defence was not available to MasterCard.

This is the first time a UK court has given judgment on this critical issue.

What was the case about?

Sainsbury’s brought its claim against various MasterCard entities in the High Court in 2012 before its transfer to the CAT in December 2015 (following the introduction of legislation which expanded the scope of the CAT’s remit). Sainsbury’s claimed that the UK multilateral interchange fees (“MIFs”) set by MasterCard infringed the prohibition on anti-competitive agreements in Article 101 TFEU and Chapter 1 of the Competition Act 1998. MIFs are the transaction fees charged by an issuing bank (the bank from which a consumer receives their MasterCard card) against an acquiring bank (the bank which permits a seller to accept a MasterCard at the point of sale). The fee charged is a percentage of the transaction between the consumer and the seller.

This was a stand-alone claim, meaning that Sainsbury’s had to prove both the fact of the infringement and consequent liability as well as the loss that it had suffered (in contrast to a follow-on claim where a claimant can rely on a competition authority’s decision to establish liability). The European Commission had investigated and found an infringement of competition law in respect of intra-EEA MIFs and Sainsbury’s sought to argue that there was read across from the Commission’s decision to its own case. The CAT said that it was not bound to follow the Commission’s decision as the facts in the cases were materially different. It therefore applied each element of Article 101/Chapter 1 to the case in order to establish whether there had been an infringement.


The CAT held that the UK MIFs infringed Article 101/Chapter 1 and had the effect of restricting competition because, absent the MIFs, bilaterally agreed interchange fees would have been agreed at a lower rate than MasterCard’s MIFs. In effect, MasterCard had created a ‘floor’ below which the MIFs would not go.

The CAT therefore awarded Sainsbury’s damages of £68,582,245 plus interest. This sum is considerably lower than the amount claimed by Sainsbury’s (the CAT referred to the use of a “broad axe”, when assessing what overcharge had been paid, and also deducted an amount to reflect the benefit of fees received by Sainsbury’s Bank).

The pass-on defence

The judgment is of particular significance for the finding made in relation to the pass on defence. MasterCard argued that Sainsbury’s had passed some or all of the increased fees to its own downstream customers (i.e. through increased prices of products). It argued that Sainsbury’s did not suffer the full harm caused by MasterCard’s breach, and so was not entitled to recover the full value of the claim.

Significantly, pass on has never been substantively dealt with under English law, although its existence as a defence has been recognised. The CAT noted that the scope and nature of the defence needed clarification. Whilst the CAT recognised that it was likely that a proportion of the MIFs had been passed on, in order to reduce the damages owed to Sainsbury’s, it held that there had to be an identifiable increase in prices as well as a causal connection to the anti-competitive behaviour in question. On the facts, this could not be established. Further, MasterCard had not identified any purchaser or class of purchasers of Sainsbury’s to whom the overcharge has been passed, who would be in a position to claim damages.

BLP opinion

The judgment sets a strong precedent for the other entities bringing interchange fee claims against MasterCard (Arcadia, Ocado and Dixons to name a few), many of which had been stayed pending the outcome of this case. The findings on pass-on will also resonate with litigants across a wider spectrum of cartel damages actions currently brought or pending in the UK courts, with the judgment offering useful guidance on the application of the pass-on defence and what defendants will need to prove in order to demonstrate its existence.

This judgment may also have a significant impact on the UK Financial Ombudsman Service’s £19bn opt-out class action against MasterCard, recently announced on behalf of UK consumers. The full extent of the impact remains to be seen although a recently released statement from the proposed class representative remained upbeat about the ability of the consumer claim to succeed.