Sainsbury’s victory over Visa set scene for Amazon shock move

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by Nicholas Dunbar and Manpreet Singh

Created: 13 January 2022

E-commerce giant Amazon’s shock announcement in November that it would stop accepting Visa credit cards in the UK may have been emboldened by a crushing defeat suffered by Visa in the UK courts.

UK retailers, led by supermarket chain Sainsbury’s had sued Visa and Mastercard over their so-called multilateral interchange fees (MIFs), fees paid by merchants to the card issuing banks and the card networks in return for accepting card payments from customers. The retailers argued that such fees were a restriction of competition, and the UK courts agreed, with the Court of Appeal ruling in 2018 that MIFs should be set at zero.

If card issuers were able to negotiate card fees directly with merchants, then they would have an incentive to reduce these fees. Participating in multilateral agreements with Visa or Mastercard prevented this from happening, the court said.

While Mastercard MIFs had already been ruled as anticompetitive by an existing European Union court ruling, Visa’s MIFs had not, until the UK Supreme Court upheld the 2018 judgement in June 2020, opening a floodgate of claims by retailers for a refund of fees paid in the past.

Sainsbury’s settled with Visa in September 2021, with hundreds of other retailers pursuing Visa for MIF refunds through the UK Competition Appeal Tribunal. According to Visa’s 2021 annual report, “the claims that have been issued, served and/or preserved seek several billion dollars in damages”.

Although Visa can still operate non-zero MIF arrangements with banks and fintech card issuers in the UK, such arrangements are now legally vulnerable, observers say. This is not likely to have been lost on Amazon, hence its announcement which came just weeks after the Sainsbury’s settlement.

These blows to the card giants come at a time when transaction fees have become a pain point for businesses across the globe mainly for the fact that businesses of every size and industry have been hit negatively by pandemic and over and above that supply chain issues has put headwinds on cost and revenue for businesses.

The full title of the UK Supreme Court ruling in favour of Sainsbury’s is “Sainsbury’s Supermarkets Ltd (Respondent) v Visa Europe Services LLC and Others (Appellants) and Sainsbury’s Supermarkets Ltd and Others (Respondents) v MasterCard Incorporated and Others (Appellants)”.

Commercial Payments International asked both Sainsbury’s and Visa to comment on their legal settlement. Both of them noted that the settlement after the case had been reached and the terms of the agreement were confidential.