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Mastercard will pay UK grocery chain Sainsbury’s £68.5 million ($90.5 million) in damages following a lawsuit over interchange fees, according to the Financial Times .
In the case, Sainsbury’s asserted that Mastercard’s default interchange fees, which are charged on a per transaction basis, were too high. For context, the case is one of several following a 2014 European Commission hearing that found that Mastercard’s high interchange fees had broken competition laws.
The ruling affirms that card network fees can have adverse impacts on merchants. The court argued that merchants are all but required to accept cards from all issuers, according to The Wall Street Journal . That’s especially true with a network as large as Mastercard, which counted 2.3 billion cardholders worldwide in Q1 2016.
But that “requirement” gives card networks the power to freely assess interchange rates when left unchecked. And those high rates could, in the worst case, push merchants to shift some of that burden to consumers in the form of higher prices or surcharges, which could limit business. As a result, the judge assessed Mastercard with damages worth the difference between the cost of the fees it charged and a lower fee structure.
The ruling could set a precedent for future interchange litigation. This is the first major victory in a competition damages claim in the UK, according to the Financial Times. That could be critical for other cases moving forward, especially because a £19 billion ($25 billion) class action lawsuit related to high interchange fees that impacted UK prices is on the horizon.
And it could push card networks to re-evaluate their policies as similar lawsuits emerge globally. In the US, major retailers including Walmart, Home Depot, […]
