Four collective damages claims brought against Visa and MasterCard over multilateral interchange fees (MIFs) will test the scope of a so-called ‘hybrid’ opt-in/opt-out approach at the Competition Appeal Tribunal (CAT), the adviser behind the claims has told this news service.

The court will be asked to certify claims demarcated between opt-out and opt-in based on class member turnover, with the applications also split respectively between the card giants, the lawyer said.

Commercial and Interregional Card Claims (CICC) I and Commercial and Interregional Card Claims II lodged four Collective Proceedings Order (CPO) applications as the proposed class representatives (PCR). CICC I and CICC II are special purpose vehicles with Stephen Allen as director of the entities. The card companies each face a respective opt-in and opt-out application against them, led by the PCR and law firm Harcus Parker.

The claims were published by the UK Competition Appeal Tribunal (CAT) on 1 August, and are stand-alone, though they rely on the 2007 European Commission (EC) decision finding that MIFs applied by MasterCard restricted competition. The Brussels agency's decision was backed by the European Court of Justice in September 2014. MIFs are fees charged on card payment transactions, for which the merchant pays a sum to the issuing banks.

Harcus Parker partner Jeremy Robinson told PaRR that the claims focus on commercial card MIFs and inter-regional MIFs, with a deliberate choice made to “hive off” these interchange fees from other MIFs and consider the scale of the issue across the economy.

“We wanted to come up with a commensurately large, comprehensive solution. That is why we chose a hybrid of opt-in and opt-out class actions that has not been seen before,” Robinson said.

The lawyer said that one respective opt-in and opt-out application for each of MasterCard and Visa would create flexibility and ensure the comprehensive treatment of these interchange fees.

“The level of MIF charges for commercial and inter-regional is far higher than the level of MIF which is permitted for consumer card domestic United Kingdom MIFs… those businesses who accept those cards are having to pay far more for transactions and we’re seeking to address this with these actions,” Robinson said.

The lawyer said that the claims will be open to merchants accepting payment by commercial card, with those involved in the opt-in claims required to obtain data from their payment processor showing the level of MIF they have paid, as evidence of the alleged overcharge.

Proposed class representative Steve Allen said that his long career in business makes him suitable to act in these claims, including time spent as a company director and sitting on various advisory boards and trade bodies. “I’ve had a good breadth of business experience and understanding, and I’m particularly motivated for this,” he said.

Allen noted that while the bulk of his corporate experience lies in the travel and hospitality sectors, the collective claims are economy-wide and impact many sectors. “We think it is wrong that commercial cards impose costs on businesses several times higher than domestic consumer cards,” he said.

Robinson explained that the CPO applications are on behalf of merchants, with the dividing line between opt-in and opt-out based on average annual turnover from 2016 to 2019.

The applications seek damages up until the date of judgment. The lawyer said that it is proposed that businesses with a turnover defined as less than GBP 100m on average would be automatically included as opt-out claimants.  

Businesses with a turnover of GBP 100m or more within that period would have to choose formally to opt-in to the claims.  “There is no overlap between opt-out and opt-in,” Robinson said.

The lawyer told PaRR that the opt-out claims will be run on the basis of seeking an aggregate award of damages, with a methodology outlining distribution. “And for the opt-in, we are seeking compensatory damages, and therefore, the total damages for the whole opt-in class will depend on how many opt in,” Robinson said.

While both Robinson and Allen agreed that it would be too early to specify estimates for quantum or even the possible number of class members, Robinson said that it was expected that “several hundred thousands” of businesses could be involved in the opt-out claims, with a smaller number expected to opt in, albeit representing bigger businesses.

The proposed class representative has instructed Michael Bowsher QC and Conor McCarthy of Monckton Chambers and Derek Spitz of One Essex Court, as counsel. The PCR’s economic expert is Nils von Hinten-Reed, founder and managing director of CEG Europe. The claims are funded and insured by Bench Walk Advisers.

Allen said that there will be continued outreach to companies who may have been overcharged by the MIFs and are unaware of the claims, as well as updates published on the claims’ dedicated website.

“Businesses should not be subject to these unlawful charges in the future,” Jeremy Robinson said, adding that cases such as these, as well as lobbying, could work to create long-term change.

“We firmly believe that businesses of all size gain real value from the acceptance of cards issued on our network, and we are committed to helping our retail partners grow their businesses and encourage the adoption of ever more convenient, safe and secure ways to pay and get paid,” a spokesperson for MasterCard told PaRR.

Visa could not be reached for comment.

In February 2014, the EC accepted and made legally binding commitments offered by Visa Europe concerning the level of MIFs for credit card payments, and in April 2019 the EC accepted commitments from the two card giants to lower the MIFs for payments in the European Economic Area (EEA) with consumer cards elsewhere. Both card networks committed to reduce their respective inter-regional interchange fees by on average 40%, following statements of objections sent in 2015 and 2017.