Visa and Mastercard face an opt-out class action seeking more than £700m over alleged overcharges on payments made with cards issued in the European Economic Area (EEA).
The litigation, brought in the UK, centres on payments from EEA-based customers to UK businesses and seeks compensation for fees the claimants say were wrongly charged. If the claim is certified, it could be worth up to £700m.
Geradin Partners is acting in the proceedings, filed in the Competition Appeal Tribunal (CAT) by Ann Pope, a former senior director at the Competition and Markets Authority. Pope is leading the cases against both payment providers.
The claim alleges that the card providers overcharged thousands of UK businesses accepting payments from EEA customers, with fees increasing at least fivefold from October 2021 after EU caps ceased to apply following Brexit.
The increased charges are estimated to have cost UK businesses £150m to £200m each year. The proposed class comprises approximately 126,000 UK businesses that have used online and other remote payments, including by phone, with EEA-issued Visa or Mastercard consumer debit or credit cards since October 2020, with inclusion by default if the opt-out proceedings are certified.
Pope said: “Europe is a crucial market for many British businesses, who accept online transactions from EEA-based customers every day without a second thought.
“Following Brexit, the fees charged on these transactions have increased fivefold. Our legal action seeks to recover what we say UK businesses have wrongly been required to pay.”
The claim argues that transaction costs remained substantially unchanged because the UK continued to participate in the Single Euro Payments Area, despite the removal of EU caps.
The action follows a separate CAT case in which inter-regional fees were found unlawful under Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), with Pope’s claim additionally challenging their post-Brexit increase, although the card providers maintain they had an exemption under Article 101(3).
Further litigation against Visa and Mastercard over alleged fee overcharges was registered in the CAT last month, while the long-running Merricks litigation against Visa and Mastercard finally concluded this summer with an agreed, if controversial, settlement after a decade of litigation.
David Gallagher, a partner at Geradin Partners, said: “Visa and Mastercard have great power over the payments that businesses rely on every day.
“The CAT has already found that their interchange fee arrangements restrict competition. Following Brexit, Visa and Mastercard substantially increased interchange fees charged on transactions with EEA consumers. This prompted the UK payments regulator to propose a price cap – which has not yet been implemented but is still being considered.”
He concluded: “Our claims seek redress for UK businesses who, we say, have suffered harm as a result of Visa and Mastercard’s conduct.”
Mastercard said it would defend the claim robustly. A spokesperson said: “We strongly disagree with the basis of this claim. Interchange plays a vital role in supporting the UK payments ecosystem and ensures people and businesses can pay and get paid quickly and securely.
“This speculative claim does nothing to support UK businesses or consumers and instead reflects the growing trend of opportunistic funder-backed litigation. It is exactly the type of claim the UK government’s recently announced proposed opt-out class action reforms are directed at preventing.”
The proceedings are funded by litigation funder Elm Claims, which is wholly owned by funds managed by affiliates of Fortress Investment Group, which previously owned Vannin Capital.
Geradin Partners has instructed Colin West KC and Ali Al-Karim of Brick Court Chambers, Ellen Tims of Essex Court Chambers and Sym Hunt-Brady of 4 Pump Court to act as their counsel at the tribunal.
It is not known who will defend the claim. Freshfields and Jones Day have previously acted for Mastercard, while Linklaters and Milbank have represented Visa in other litigation.
Genevieve Quierin, head of the group actions team at Stephenson Harwood, who has been acting for UK and European merchants in interchange claims since 2014, said the claim was one of many that both UK and European businesses have brought against Visa and Mastercard in the CAT.
She explained: “It comes on the back of victories we and Scott & Scott secured on liability and pass-on issues against the card schemes in recent years and is no doubt not the last interchange claim we will see issued in the CAT given the card schemes continue to charge interchange fees across the UK and Europe.”
Adam Polonsky, a partner colleague of Quierin’s, said it was encouraging that further steps were being taken to seek redress for merchants against anticompetitive card fees. However, he added: “It is frustrating that, despite litigation having been ongoing in this jurisdiction since 2012 against the card schemes, they continue to charge interchange fees on all merchant transactions, which merchants have no power to negotiate.”
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