MasterCard has been ordered to pay Sainsbury’s Supermarkets Limited £68.5 million plus interest in the first substantial award in a competition damages claim in the United Kingdom. In the light of the findings of the Competition Appeal Tribunal (“CAT”) in relation to the passing-on defence, the detail of this ruling should inform the manner in which both claimants and defendants approach potential follow-on claims in future, including their priorities as regards evidence gathering and retention in the immediate aftermath of an infringement decision. The CAT’s ruling is the first one under English law substantively dealing with the passing-on defence.

The CAT found that:

  • The Multilateral Interchange Fee (“MIF”) charged on transactions which was set by MasterCard was a restriction of competition by effect. The MasterCard system could have operated on the basis of interchange fees agreed bilaterally between the banks involved and this would have resulted in lower fees of 0.5% rather than 0.9% for credit cards and 0.27% rather than 0.36% for debit cards.
  • Sainsbury’s claim was not barred by the principle of ex turpi causa because Sainsbury’s Bank was no part of a relevant “single economic unit” with Sainsbury’s and Sainsbury’s Bank did not bear significant responsibility for the infringement as a consequence of its membership of the MasterCard system.
  • Sainsbury’s was however required to give credit for the inflated MIFs paid to Sainsbury’s Bank in calculating the overall damages award.
  • On the facts available and owing to the highly sophisticated manner in which Sainsbury’s controlled its costs and pricing, it was not possible for the CAT to identify any specific increases in prices that were causally connected with the overcharge. Consequently MasterCard’s defence that a substantial proportion of the costs were passed on by Sainsbury’s to its customers was unsuccessful.

Of particular interest to businesses who have been involved in or affected by infringements of competition law, the CAT made clear that a passing-on defence ought only to succeed where the defendant is able to demonstrate, on a balance of probabilities, that there exists another category of claimant, downstream of the claimants in the action, to whom an overcharge has been passed on. It was accepted in a general sense by the CAT that costs incurred by Sainsbury’s in the form of higher MIFs must have been passed on to consumers to some extent. However the CAT emphasised the risk of presuming pass-on of costs to indirect purchasers without clear evidence of who they are and how the pass-on occurred. The CAT was concerned about the risk that any potential indirect claim becomes so fragmented or impossible to prove that the defendant ultimately retains the overcharge borne by such purchasers. Businesses affected by recent decisions such as the decision in relation to the alleged heavy goods vehicle manufacture/haulage pricing cartel announced this week would be well advised to take account of this judgment in assessing their position.

The decision is also of very direct interest to those involved in similar claims arising out of the MIFs applied to MasterCard and Visa transactions. In this regard the fact that the CAT has ruled that MIFs would have been lower but for the infringing conduct will be helpful to claimants but the “allowable” rates set by the CAT may assist the defendants in resisting allegations that the MIFs would have been close to zero but for the infringing conduct, thus reducing damages.