A surprise decision by the Court Of Appeal in London means Mastercard will have to face the threat of £14 billion in compensation claims which it thought it had escaped two years ago.
The Competition Appeal Tribunal (CAT) threw out a class action claim against the credit card giant in 2016, but now the Court Of Appeal has ordered it to look again.
46 million people
The claim alleges that for 16 years 46 million people paid higher prices in shops than they should have because of high card fees.
Former financial ombudsman Walter Merricks is the man who set up the case on behalf of anyone over the age of 16 who was resident in the UK for at least three months between 1992 and 2008 and bought an item or service using a Mastercard.
The allegation is that consumers paid more for their goods and services than they should have because Mastercard charged the business high interchange fees.
It is based on a decision by the European Commission in 2007 that the interchange fees were in breach of competition law.
If the £14 billion claim is upheld it is estimated that everyone involved in the class action would receive £300 in compensation.
Examining the case, the Court Of Appeal said CAT applied the wrong legal test when they made the decision to throw the claim out two years ago and will now have to reconsider its findings.
Mr Merricks said he was ‘very pleased’ with the decision, adding: “It is nearly 12 years since Mastercard was clearly told that they had broken the law by imposing excessive card transaction charges, damaging consumers over a prolonged period.
“As a result, we all had to pay higher prices in the shops than we should have done – while Mastercard have pocketed the profits.”
A spokesman for Mastercard said it continued to ‘disagree fundamentally with the basis of the claim’.
He added: “This decision is not a final ruling and the proposed claim is not approved to move forward; rather, the court has simply said a rehearing on certain issues should happen.”
The firm is also seeking leave to appeal the ruling to the Supreme Court.
European Commission fine
In January the European Commission fined Mastercard €573 million – £504 million – for anti-competitive behaviour by preventing retailers using cheaper banking services outside their home country.
Prior to 2015 Mastercard had forced banks receiving card payments to use a fee set in their home country, even if cheaper rates were available elsewhere in the European Union.
Commissioner Margrethe Vestager said: “European consumers use payment cards every day, when they buy food or clothes or make purchases online.
“By preventing merchants from shopping around for better conditions offered by banks in other member states, Mastercard’s rules artificially raised the costs of card payments, harming consumers and retailers in the EU.”
The company said in a statement: “This decision relates to historic practices only, covers a limited period of time of less than two years and will not require any modification of Mastercard’s current business practices.”