What does Sainsbury’s MasterCard lawsuit mean for retail?

In a groundbreaking judgment, the Competition Appeal Tribunal has required MasterCard to pay £68.6 million in damages to Sainsbury’s.

The damages relate to charges which MasterCard set between 2006 and 2015. Those fees make up approximately 90% of the merchant service charge which retailers pay for card acquiring services.

Head of commercial and competition law at Sainsbury’s Edward Anderson says: “Whilst we are still working through its findings, this is a landmark decision on many fronts.”

The reasons this is a landmark decision are, firstly, that this was the first cartel damages action to be fully litigated in the UK, paving the way for other retailers (such as Morrisons) which are bringing similar actions against MasterCard and Visa.

Secondly, the tribunal dismissed MasterCard’s argument that Sainsbury’s had passed the extra charges to its end customers, which would have meant it had suffered no (or less) loss. This is bad news for a recently launched £19 billion class action, launched collectively on behalf of consumers by former financial services ombudsman Walter Merricks, which relies on the fact that such customers lost out.

Thirdly, in calculating the level of damages, the tribunal determined Sainsbury’s would have paid lower rates, had it been left to negotiate bilaterally, rather than having fees set by MasterCard.

Addleshaw Goddard competition managing associate Al Mangan said “Interestingly, those bilateral rates were higher than regulatory caps recently imposed by European regulators.

“MasterCard will welcome this because not only could it reduce the magnitude of future claims, it may also influence any post-Brexit discussions over the level of such domestic fee caps.”