This decision – available here – concerns a standalone claim for damages against MasterCard brought before the English courts. As some of you will know, disputes over the legality of Multilateral Interchange Fees (MIFs) and various payment card-schemes has been ongoing for well over a decade.  In the US, it included a decision on the legality of the American Express System which has found its way to the Supreme Court docket. In this case, which follows a decision by the European Commission – but is not a follow on claim since the practices in question, while similar, are not the same ones that were subject to the Commission’s decision – the English courts had to decide whether the level at which MasterCard set its MIFs was illegal, and hence whether damages are due.

You may be pleased to hear that the decision is long and complicated – if nothing else, because it conducts an in-depth effects based assessment that hinges on whether the MIFs amount to a restriction of competition. While the decision is said to rely on European law, it carefully yet brazenly departs from a previous decision by the European Commission (upheld by the EU courts) that found MasterCard’s MIF’s to infringe upon competition law. This is because, on the facts, the individual MIFs under consideration here were different from those found wanting by the European Commission, which meant that they had to be subject to an independent factual assessment.

The decision begins by describing the structure of various payment cards’ systems. Following this, it: (i) provides a description of the various cases against Visa and MasterCard in Europe (paras. 63-76) and the UK (paras. 90-97); (ii) explains why the present decision needs to be distinguished from previous EU cases (see paras. 82, 84 and 87); (iii) provides a detailed overview of the UK and Ireland’s payment card’s markets (paras. 87-104).

At a second stage, the Court engages in a detailed analysis of whether the MasterCard MIFs sub judice could be said to amount to a restriction of competition under Art. 101(1) TFEU. It does this as follows: (i) it discusses in detail what counterfactual scenarios can be taken into account, given their plausibility (paras. 128-155); (ii) it determines whether, given the available counterfactuals:

(a) the existence of any MIF will amount to a restriction of competition (paras. 156-253) – the answer is no, because a MIF was an ancillary restriction necessary to prevent issuer banks from abandoning MasterCard for Visa, which had its own MIF (para. 233);

(b) the level at which the MIFs were set nonetheless amount to a restriction of competition (paras. 254-260) – the answer, in short, is that there is a level at which a MIF becomes anticompetitive, but the MIFs under review were below that level (para. 255).

The court assumed – correctly – that its decision would likely be subject to appeal, and thus also reviewed whether, should the MIFs under review amount to a restriction of competition, they would be justified under Art. 101(3) TFEU (which allows for certain efficiency defences). In this section, and when measuring the benefits of the MIF against its cost, the court adopts a methodology which allows it to determine the level at which the MIF would become a restriction of competition (paras. 261-421 ; for the exemption levels, see paras. 418-420).

Regardless of one fully agrees with the court’s analysis, this is how an effects based decision should look like. Every legal point is argued to the point of putting a competition nerd to sleep, and every factual matter is canvassed. The judge even provides a review of the economic literature on methodologies to determine whether interchange fees are acceptable (including the classics by Tirole), apparently ex motto proprio (paras. 340-350).

On the other hand, the decision provides evidence of the costs inherent to in-depth effects-based assessments: decades after the issue was first raised, one can only imagine the amount of work, time and costs that all parties, and the court, had to put into this case. And yet, MasterCard (and Visa) still have no bright line rule as to what conduct is lawful and not.  But such is the cost of favouring false negatives and avoiding chilling competition (and of dealing with claims for damages exceeding GBP 100 million…).

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