On Thursday 30 November 2017 the High Court handed down its judgment in Sainsbury’s Supermarkets Ltd v Visa Europe Services LLC & Ors.1 This is the latest in a series of damages claims against MasterCard and Visa in the UK, following findings by the European Commission in 2007 that MasterCard’s crossborder EEA multilateral interchange fees (MIFs) were in breach of what is now Article 101 of the Treaty on the Functioning of the European Union (TFEU). Similar European Commission proceedings against Visa were concluded in 2010 with a decision accepting commitments.

This case concerns the MIFs set by Visa for transactions in the UK (which are similar to, but distinct from, the cross-border EEA MIFs considered by the Commission). It raises substantially similar issues on the appropriate counterfactual to use in competition damages claims to those addressed in the conflicting decisions of the Competition Appeal Tribunal (CAT) on 14 July 2016 in Sainsbury’s Supermarkets Ltd v MasterCard Incorporated and others,2 and the High Court in Asda Stores Limited & Ors v MasterCard.3 In this latest decision the overall conclusion of Phillips J, that the Visa’s UK MIFs did not restrict competition, is consistent with that of Popplewell J in Asda, but much of his conclusion has in fact been reasoned on quite a different basis.

Background to the Visa scheme

Sainsbury’s, in common with all merchants accepting Visa credit and debit cards (Merchants), accepts Visa cards pursuant to an agreement with a bank or financial institution known as an Acquirer who is a member of the Visa scheme. Merchants pay a per transaction fee to the Acquirer for its services known as a Merchant Service Charge. The aspect of the Merchant Service Charge at issue in this case was the interchange fee charged by the issuer of the debit or credicard (the Issuer) to the Acquirer. Whilst the regulations of the Visa Europe System permits Issuers and Acquirers to negotiate a bilateral interchange fee (BIF), in practice in the UK the interchange fee that is used is the MIF that is set by Visa as the default for the relevant type of transaction.

Sainsbury’s claim was that the MIF unlawfully restricted competition on the acquiring market, by: (i) removing the uncertainty amongst Acquirers about what their competitors are paying Issuers and dramatically reduced the scope for them to compete on price; and (ii) acting as a “floor” on the Merchant Service Charge.

Approach to the analysis of anticompetitive effects

Phillips J first set out his overall approach to the analysis of anticompetitive effect under Article 101 and, in particular, considered an argument that the mere fact that an agreement results in higher prices than if the agreement had not been made is sufficient to entail a restriction of competition by effect contrary to Article 101 TFEU. He noted at the outset that:

  • The restrictive effects of an agreement do not fall to be considered in absolute terms, but in comparison to the state of competition that would exist in the absence of that agreement. It is therefore necessary to identify a realistic hypothetical “counterfactual” in which the market would be appreciably more competitive;
  • Article 101 TFEU is expressly concerned with agreements that prevent, restrict or distort competition. The effect of the agreement on competition and not just on prices therefore needs to be examined; and
  • An agreement that increases prices without restricting competition may be an abuse of a dominant position contrary to Article 102 TFEU, but it is not on that ground alone a breach of Article 101.

The relevant counterfactual

It was common ground amongst the parties that the appropriate counterfactual involved: (i) the absence of the restrictive provision, with parties free to negotiate BIFs; and (ii) a default rule that in the absence of a BIF transactions would be settled at par, with a restriction on ex-post pricing (i.e. any bilateral agreements would need to be reached before a transaction was concluded). All parties agreed that a scheme without such a default rule would be unworkable in practice.

In examining the relevant counterfactual the court first considered whether there would be BIFs in the no MIF counterfactual. The High Court in Asda and the CAT in Sainsbury’s v MasterCard had disagreed on this point, with the CAT concluding that in a counterfactual scenario, BIFs probably would be agreed.However, Phillips J took a similar approach on this point to Popplewell J in Asda, focusing on the lack of the previous existence of BIFs in the UK market. As such the High Court required clear evidence, which had not been presented, that BIFs would emerge.

The second question that the court addressed was whether, in the absence of BIFs, there would be a greater degree of competition between acquirers in the no MIF counterfactual. Phillips J found that the degree of competition that takes place in a no MIF counterfactual is no different to that which takes place where there is a non-zero default MIF level. In both cases, the market will not deviate from the default settlement rule imposed by the scheme. The court considered whether there was an inconsistency between this finding and the European Commission’s original decision in relation to Mastercard’s EEA MIFs (which had been upheld by the CJEU), but concluded that the difference was explained by an underlying difference in the findings of fact as the Commission had found that in the absence of the EEA MIF there would be bilateral negotiations.

The High Court then turned to whether the MIF infringed Article 101 TFEU as it acted as a “floor” for the Merchant Service Charge. In Asda, Popplewell J had found that a MIF acted as a de facto “floor” and restricted competition as it interferes with the ability of Acquirers to compete for Merchants’ business. Phillips J disagreed with this conclusion; rather than characterising the MIF as a floor, the court approached the MIF as a default price, which would be present even in them no MIF counterfactual (i.e. the zero MIF would also be a “floor”).

What assumptions should be made about Mastercard in the counterfactual scenario?

Although the court found that Visa’s MIFs do not restrict competition under Article 101(1) in any event, Phillips J also considered the question of what assumptions, if any, should be made about the behaviour of MasterCard in the counterfactual. In Sainsbury’s v MasterCard and Asda, both courts had assumed that in a counterfactual scenario other schemes would be able to continue to set MIFs on the historic basis, but had gone on to reach conflicting conclusions as to the implications of this. For Phillips J this conflict demonstrated the “inherent difficulty (if not absurdity) in attempting to analyse the competitive effects of one or other of the two major four-party schemes on the hypothetical basis that one of them is, in the counterfactual, deemed to be subjected to markedly different restraints than the other.”4 As a matter of law and logic, the court therefore considered that the counterfactual should use symmetrical assumptions about MasterCard and Visa’s behaviour.


The High Court found that Visa’s MIFs do not restrict competition contrary to Article 101 TFEU. In its approach the High Court has put forward yet another way, in addition to those taken in Sainsbury’s v MasterCard and Asda, and also that by the European Commission in 2007, of analysing the effect on competition of Visa and MasterCard’s MIFs.

The Court of Appeal will hear appeals in both of the MasterCard cases in April 2018. Sainsbury’s has until 21 December 2017 to decide whether to appeal this decision.