MIFfed: credit card processing fees

Sainsbury’s v Visa and Mastercard [2020] UKSC 24

The Supreme Court in London recently considered a competition case relating to fees – known as Multilateral Interchange Fees (MIFs) – charged by a cardholder’s bank to a merchant’s bank on each card transaction.

• This is how it works: Visa or Mastercard set the rules.  They then allow institutions to join as issuers and/or acquirers. 
• A cardholder contracts with an issuer.  The issuer provides the cardholder with a debit or credit card. 
• Merchants contract with an acquirer so that they can accept card payments from cardholders.
• A cardholder contracts with a merchant.  The issuer pays the acquirer, who passes that payment on to the merchant less a merchant service charge (MSC).  A MIF, as a percentage of the MSC, is then paid by the acquirer to the issuer.
• Meanwhile, Visa and Mastercard make their money from fees paid by insurers and acquirers independently of MIFs.

Confused much?!  Even the Supreme Court seemed to have some difficulty, resorting to a diagram in their judgment to explain things:

^{Source: UK Supreme Court}

In any event, Sainsbury’s, along Asda, Morrisons and Argos, argued, as merchants, that MIFs were an unlawful restriction of competition contrary EU and UK law. 

The Supreme Court agreed, remitting the case for an assessment of damages.

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