Judgment (Trial 2)

The judgment relates to the long-running competition litigation between merchant retailers and the payment card schemes operated by the Defendants, Visa and Mastercard, concerning the lawfulness of multilateral interchange fees (“MIFs”) paid by the merchant retailers to their acquiring banks as part of the merchant service charge (“MSC”). This judgment concerns Trial 2 which took place between November 2024 and April 2025.

Trial 1 was concerned with the Defendants’ liability under Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”). The Tribunal handed down its judgment on Trial 1, reported at [2025] CAT 37, in which it found such an infringement. The Defendants are entitled to, and still wish to, argue the exemption provided for in Article 101(3) TFEU applies. This will be determined in Trial 3.

Trial 2 concerned two questions on pass-on, assuming that the MIFs were unlawful. Trial 2A was concerned with merchant pass-on (“MPO”) whereby the Defendants allege that the merchant retailers have passed on the unlawful overcharge from the MIFs, principally to their customers by way of higher prices. The Defendants (particularly Mastercard) also alleged supplier pass-on whereby, as a result of the overcharge, merchant retailers reduced the amount they paid to their suppliers. Trial 2B was concerned with acquirer pass-on (“APO”) whereby the merchant retailers alleged that the MIFs were passed on to them by the acquiring banks in the form of higher MSCs, such that they, the merchant retailers, suffered loss.

As to the legal principles in relation to pass-on, as a form of mitigation defence, the Tribunal held that the Defendants had to prove a direct causative link between the MIF overcharge and the setting of downstream prices to consumers. For such a small cost as the MSC, the Defendants could not satisfy that test by showing that it might have been passed on.

For Trial 2A, apart from Travix, WorldRemit and the underwriting part of Allianz’s business, the Tribunal found that the Defendants had not proved on the balance of probabilities that there was a direct causative link between the analysed claimants’ MSC cost and the prices charged to their customers. Accordingly, there was no pass-on of the MSC cost sufficient to satisfy the legal test for causation.

In relation to the claimants Travix, WorldRemit and the underwriting part of Allianz’s business, the Defendants had established the necessary direct causative link. Hence, for these sectors where the Defendants had shown on the balance of probabilities that the claimants have in fact passed on their losses to their customers, the broad axe applied to the quantum of any such pass-on. In assessing this, the Tribunal considered the econometric evidence provided by the parties’ respective economic experts.

For the cash services sub-sector, based on WorldRemit, the Tribunal found there was full pass-on of the MSC. For the insurance underwriting sub-sector, based on Allianz, the Tribunal found that there was pass-on at a rate of 46.7%. For the travel agents and online intermediaries sub-sector, based on Travix, the Tribunal found a pass-on rate of 47.5%.

Regarding supplier pass-on, the Tribunal found the Defendants had not proved on the balance of probabilities that there was any supplier pass-on by any claimant.

For Trial 2B, it was common ground between the parties that the APO for IC+ and IC++ contracts was 100%. This was because the structure of those contracts provides for acquirers to pass on to merchants the MIFs in their entirety at whatever level they might be from time to time. It was agreed between the parties’ experts that there was a material degree of pass-on for merchants on standard contracts, with the lowest estimate from the parties being 60% and the highest being 100%. The issue was therefore not about the test for, or the fact of, causation, but rather to what extent the MIF had actually been passed on, applying the broad axe.

In relation to standard contracts, the Tribunal found, making an assessment in the round and applying the broad axe, there was an APO rate of 85%.