Further to our recent blog posts regarding the long running litigation, last week the Supreme Court ordered that permission to appeal be granted to the Claimants in MasterCard Incorporated and others (Respondents) v Deutsche Bahn AG and others (Appellants) – UKSC 2017/0095. The appeal concerns prospective amendments to the Claimants’ case in the litigation which would introduce new claims against Mastercard based upon MasterCard’s central acquiring rules (which concern cross border transactions and related fees imposed by MasterCard).
Background to MasterCard litigation
As explained in our previous blogs, the actions against MasterCard have been in respect of the “multilateral interchange fee” (“MIF”). Interchange fees are paid by a retailer’s card acceptance provider to a consumer’s card issuer (such as MasterCard) every time a card transaction takes place. The retailer’s bank pays the retailer the cost of the goods/services, less a service charge that is largely determined by the level of MIF. Retailers then pass on the cost of accepting card payments to their customers, by way of increased retail prices. Interchange fees can be bilaterally agreed between the issuing bank and the retailer’s bank, or, the default fee established multilaterally by MasterCard (the MIF) will apply. The MIF should be limited to no more than 0.3% on credit cards and 0.2% on debit cards.
As highlighted in our blog from 20 September 2016, in 2007 the European Commission issued a decision against MasterCard which was applicable to cross-border transactions using MasterCard and Maestro credit and debit cards in the European Economic Area. It found that MasterCard’s MIF breached Article 101 on the Treaty on the Functioning of the European Union (“TFEU”), because they restricted competition between retailers’ banks and inflated the cost of card acceptance by retailers. In 2014, the ECJ upheld the 2007 decision, determining that MasterCard’s MIFS on cross-border transactions in the EEA did restrict competition.
Background to the appeal to the Supreme Court
Deutsche Bahn AG and others (which includes several hundred claimant companies within the Deutsche Bahn, Inditex, ASOS, Metro, AE and Hertz Groups who operate in 17 EEA countries and Switzerland) (“Claimants”) brought proceedings against Mastercard in both the High Court (Chancery Division) (in late 2012). The claim was based upon the breach of Article 101 of the TFEU explained in the paragraph above. In addition, the Claimants claimed for breaches of Belgian competition law.
In 2013, the European Commission opened a further investigation into MasterCard. This resulted, in 2015, in the European Commission sending MasterCard a “statement of objections” (a formal step in European Commission anti-trust investigations), which set out further alleged breaches of Article 101(1) of the TFEU. The areas of concern were:
- MasterCard’s rules on cross-border acquiring. The definition of cross-border acquiring is “the activity of an acquirer which aims to recruit for card acceptance merchants based in a different EEA country from the acquirer”. Essentially, Mastercard were found to be restricting competition for banks in cross-border transactions, i.e. Mastercard’s rules limited the opportunities to compete on price cross-border, meaning that retailers would not benefit from dealing with an acquiring bank in a lower interchange fee state). This was linked to MasterCard’s central acquiring rule (“CAR”). The CAR establishes that a bank can act as a “central acquirer”, acting as acquirer for a merchant based outside of the acquirer’s country. If there is no bilateral agreement in place between the central acquirer and the issuing bank, the central acquirer will pay the domestic MIF of the state the transaction took place in (for an intra-country transaction), or, in the absence of both a bilateral agreement and a domestic MIF, the acquirer will pay the EEA MIF; and
- Inter-region interchange fees. These are fees paid by an acquiring bank when a transaction occurred within the EU, but, with a MasterCard which was issued outside of the EU (most typically in the case of a tourist/traveller). The example given by the European Commission in its statement of objections was that “the fees paid by an acquiring bank when a Chinese tourist uses his card to pay his restaurant bill in Brussels are up to five times higher than those paid when a consumer uses a card issued in Europe”. The level of these fees, as set by MasterCard, were considered to be artificially high and again had the end result of increasing prices for consumers. Notably, inter-region interchange fees have been the subject of further European Commission scrutiny in 2017, with the Commission issuing a statement of objections to Visa in respect of such fees.
In light of the above, the Claimants sought to amend their claim in the High Court, to introduce a new claim based upon MasterCard’s CAR.
Permission to amend was originally granted in early 2017. Given that the Claimants had limitation issues (because some of the claims related to MIFs paid from 1992 onwards), in order to bring a new claim, the Claimants had to demonstrate that Civil Procedure Rule 17.4 was satisfied. This meant showing that the new claim “arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”. The High Court Judge decided in favour of the Claimants
- Considering that a “new” claim in relation to the CAR satisfied the provisions of CPR 17.4, arising out of the same or substantially the same facts as the original action. That is, the original claims all arose out of the 2007 commission decision referred to above, and the MIF. The CAR was held to be arising out of the same facts as it is a mechanism by which the MIF is applied; and
- The benefit of the above being that, for limitation purposes, the “new” claim was held as having been commenced by the Claimants when the original claims were brought. This is due to Section 35 of the Limitation Act 1980 (“LA 1980”) which states that any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced on the same date as the original action. This decision was clearly damaging to MasterCard’s limitation defence. MasterCard sought to argue that any allowed amendment should only take effect from the date upon which the Claimants’ served an application to amend their Particulars of Claim – which would follow the approach taken in WM Morrison Supermarkets Plc & Ors v MasterCard Inc & Ors  EWHC 3271.
MasterCard appealed this ruling to the Court of Appeal in S
pring 2017, arguing that the Claimant’s new claim did not arise from substantially the same facts. MasterCard was successful in this appeal. The Court of Appeal considered that actually, new factual enquiries would be required into the new claim. As such, the test in CPR 17.4 was not satisfied and the Claimants could not gain the limitation benefit under Section 35 of the LA 1980 (discussed at point (2) above).
Unsurprisingly, the Court of Appeal decision was appealed by the Claimants, who have just been granted permission to appeal by the Supreme Court. A Supreme Court hearing date is awaited and we will report further on this case as reaches its conclusion in the Supreme Court.