High Court rules on liability in damages actions by retailers against MasterCard

The High Court of England and Wales has ruled that the major part of MasterCard’s English and Irish multi-lateral interchange fees (MIFs) were lawful, thwarting competition damages claims by ten retailers.

The claimants alleged that MasterCard’s EEA, UK and Irish MIFs infringed Article 101(1) TFEU and the equivalent national law provisions.

The judgment follows an initial trial to determine a number of preliminary issues of liability and quantum.

The High Court adopted a different approach to that of the Competition Appeal Tribunal (CAT) in its judgment on a recent damages action brought by Sainsbury’s against MasterCard.  It found that against a counterfactual where MasterCard’s interchange fees would have been set at zero, the MasterCard scheme would not have survived in the UK or Ireland in a materially and recognisably similar form. 

While the High Court said that it accorded the CAT judgment “considerable respect” this was not binding.  In particular, the Court ruled that the evidence before it was “rather different” from the “conflicting and anecdotal evidence” seen by the CAT.

It should be noted that arguments based on the potential demise of MasterCard were not raised in relation to the EEA MIFs and the High Court said that these constitute a restriction of competition, albeit the EEA credit card MIFs were at exemptible levels.

Asda Stores Limited and Others v MasterCard Inc and Others, judgment of 30 January 2017, [2017] EWHC 93 (Comm)

CMA reaches settlement in furniture cartel investigation

The Competition and Markets Authority has reached a settlement with two furniture suppliers resulting in fines totalling GBP2.8 million for infringement of the Chapter I prohibition.

Furniture suppliers Thomas Armstrong (Timber) Limited and Hoffman Thornwood Limited have admitted market sharing, price coordination, bid rigging and exchange of commercially sensitive information

The penalties include a 20% reduction for settlement reflecting the companies’ admission of the infringement and their agreement to a streamlined resolution of the case.

The CMA has stated that another furniture manufacturer (BHK (UK) Limited) will avoid fines after confessing to the infringement and provided that it continues to cooperate with the CMA’s leniency policy.

The fines will become payable when the CMA issues a formal infringement decision imposing the fines and setting out the basis for their calculation.  A formal statement of objections is expected to be issued by the end of January 2017.  The issue of a statement of objections after a settlement has been reached is relatively rare.  However, depending on the complexity of the infringements it may be easier to agree a settlement earlier in the process.

The investigation began as a criminal investigation under section 188 of the Enterprise Act 2002.  However, the CMA decided not to pursue a criminal investigation and the case was closed in 2015.  This may be explained in part by concerns that the CMA might have faced challenges in convincing a jury that the dishonesty requirement was met. The infringements predate April 2014 when the requirement to prove dishonesty under section 188 was removed.

The case is indicative of the CMA’s increased readiness to open competition cases where, over the last year, the CMA opened 14 new competition cases.

Court of Justice rejects European Commission appeal on late payment interest

The European Court of Justice has dismissed an appeal by the European Commission against a General Court judgment that upheld appeals by Total and Elf Aquitaine against the imposition of two years’ interest on their penalties for participation in the acrylic glass cartel.

In June and July 2011 the Commission had sent letters to Total and Elf Aquitaine demanding payment of the fines imposed as well as late payment interest.  The General Court concluded that the letters were ‘actionable measures’ within the meaning of Article 263 TFEU as they affected the interests of Total and Elf Aquitaine and went beyond steps that were merely preparatory.  The General Court also concluded that the letters should be annulled insofar as they concerned payment of interest because it was clear that Total and Elf Aquitaine had paid the fines that the Commission had imposed on them within the set time periods.

The Court of Justice ruled that the appeal by the Commission against the General Court’s judgment should be dismissed.  The ruling confirms that the companies paid the original fines in full and within the relevant deadlines, rendering the Commission’s request for late payment interest unlawful.

It is somewhat unfathomable that the Commission charged late payment interest on fines paid on time.  The ruling should embolden future litigants to challenge decisions that they believe to be unfounded, although the Court of Justice’s ruling comes after a long legal battle.

Case C-351/15 P - European Commission v Total and Elf Aquitaine, judgment of 19 January 2017

General Court orders EU to pay damages for excessive delay in court proceedings

The General Court has ordered the EU to pay damages of more than EUR50,000 to Gascogne due to the excessive duration of proceedings before the European courts in dealing with its appeal against the Commission’s decision in the industrial bags cartel.

The Court considered that the right to adjudication within a reasonable period, embodied in the Charter of Fundamental Rights, was infringed as a result of the excessive length of proceedings of some five years and nine months.

The award amounts to around 1 per cent of Gascogne’s original claim for EUR4 million in respect of “material harm” that it suffered in the course of the litigation. The award is intended to cover the costs of the Gascogne group companies’ bank guarantee and compensation for non-material harm to cover unreasonably high amounts of uncertainty due to excessively long litigation.

The award confirms an important point of principle on the merits, although the level of the award suggests that companies appealing for an award that is higher than their litigation costs will face an upward struggle.  It is hoped that this award will provide an incentive to accelerate court proceedings in competition cases, but the Court has given itself some flexibility by noting that a long decisional period might be justified by the special circumstances of the case, for example in cases that are highly complex or involve multiple issues.

There are also four other damage claims before the European courts in respect of the excessive duration of proceedings in the copper fittings, industrial bags and flat glass cases.

Case T-577/14 - Gascogne Sack Deutschland and Gascogne v Court of Justice, judgment of 10 January 2017

CMA has competition concerns over MasterCard/VocaLink merger – unless acceptable remedies are offered

CMA has competition concerns over MasterCard/VocaLink merger – unless acceptable remedies are offered

The Competition and Markets Authority has stated that the proposed £700 million acquisition by MasterCard of VocaLink will be referred for a Phase 2 merger investigation unless acceptable undertakings in lieu are offered.  VocaLink provides the technology behind three of the UK’s main payment systems (Bacs, FPS and the LINK ATM network).

The transaction takes place against a backdrop where, in July 2016, the Payment Systems Regulator found in its final report on its infrastructure market review that there was no effective competition in the provision of payments infrastructure services to Bacs, FPS and LINK.  It recommended that the four largest banks sell their interests in VocaLink.

The CMA has concluded that the transaction may lead to a substantial lessening of competition in the supply of payment infrastructure services to the LINK ATM network.  The CMA has found that the merging parties are two of the most credible infrastructure services providers to the LINK ATM network and that the merger would limit the ability of LINK to obtain good value when tendering for an infrastructure provider.

The CMA has ruled out competition concerns over the supply of payment infrastructure services to Bacs and FPS, citing “many credible alternatives” for those companies. 

The CMA’s concerns in relation to the supply of infrastructure services to LINK appear to be based on the reduction in the main suppliers from 3 to 2.  However, if the CMA could be persuaded that the relevant market was a genuine bidding market that concern should be reduced.  It appears that the CMA is not so convinced.

The CMA has indicated that the parties have until 11 January to offer remedies that will address the CMA’s concerns.