Will a U.K. Class Action Case Influence Interchange Policy in the United States?

A class of 46 million consumers in the United Kingdom cleared a major hurdle last week when the country’s Supreme Court ruled that a class-action suit brought against Mastercard Inc. for excessive interchange fees can proceed. But they still face a major challenge proving that consumers were materially harmed by Mastercard’s interchange rates.

Meanwhile, merchant advocates in the United States argue the case could ultimately lay the groundwork for action against card fees that merchants pay and that, they argue, drive up consumer prices.

The lawsuit, which is seeking £14 billion ($18.5 billion) in damages, alleges that Mastercard’s U.K. interchange fees between 1992 and 2008 were excessive and forced merchants to pass the cost on to consumers. If the lawsuit is successful, members of the class could receive £300 each (nearly $400).

The case emerged after Mastercard lost an appeal against a 2007 European Commission ruling that its fees were anti-competitive. The case will be sent back to Britain’s Competition Appeal Tribunal (CAT), which will determine if it can proceed to trial.

“It’s an interesting test case of the U.K.’s law enabling mass consumer class-action suits, but (attorneys for the class) still have to prove that 46 million U.K. consumers were materially harmed because Mastercard’s interchange fees were too high,” Eric Grover, principal at Intrepid Ventures, a Minden, Nev.-based consultancy says by email.

If the CAT permits the suit to go to trial, it will likely be because it took into consideration the value and harm for consumers. Grover cites the Supreme Court’s 2017 decision that American Express Co.’s anti-steering provisions didn’t violate federal antitrust law, as an example of courts taking such a viewpoint into consideration. 

That case involved policies set by some card issuers that prevented merchants from encouraging customers to use cards from issuers with lower transaction fees. Although Mastercard and Visa Inc. settled the case with the United States Department of Justice in 2010, AmEx argued anti-steering policies benefited its cardholders and that higher transaction fees maintain member services.

“Higher interchange fees mean lower fees and more benefits for cardholders, which offset higher prices they may have paid merchants,” says Grover. “If both are weighed it’ll be a tough case (to make).” 

Despite the challenges facing attorneys for the plaintiffs, the case is still significant as it contends consumers are overpaying for goods and services as a result of the interchange fees paid by merchants, Mark Horwedel, an independent payments consultant, says by email. 

“The case directly challenges the illusion long perpetuated by card-industry advocates that interchange fees have no bearing on the prices paid by merchants’ customers,” Horwedel says. “One can only hope that the U.K. lawsuit will be successful and will embolden policymakers and regulators in the U.S. to take steps to reign in the excessive interchange and network fees which burden U.S. consumers and overly enrich big banks and card networks.”