MasteraCard is the target of a British class action lawsuit that is seeking about 14 billion pounds ($19 billion) in damages, the biggest damages claim ever in the U.K., based on allegations that the card network giant charged retailers excessive interchange fees which were then passed on to customers in the form of higher prices.
The lawsuit was brought by the U.K.’s former chief financial services ombudsman, and covers fees MasterCard charges between 1992 and 2008. About 46 million British cardholders could potentially benefit from the lawsuit.
The lawsuit follows an earlier ruling against MasterCard by the European Court of Justice, which upheld a 2007 European Commission decision that MasterCard’s cross-border transaction fees broke fair competition rules for the period between 1992 and 2007.
The writing was on the wall for this lawsuit since 2007, when the European Commission declared MasterCard's fee system to be anti-competitive. But the path probably wasn't clear for a lawsuit until that decision was upheld by the European Court of Justice.
Will this lawsuit actually make it to court sometime around 2018, as some are envisioning? It's hard to say, but the whopping figure in the damages claim doesn't bode well for a quick, easy out-court-settlement. MasterCard predictably has completely rejected the notion that it did anything wrong, and we can foresee the company following up with a campaign to prove that the amount of damages being sought is unrealistic and unfounded. It probably is going to be extremely difficult to show how retailers passed the fees onto customers, and in what amounts.
We have heard a lot of complaints about card fees in North America: Some Wal-Mart Canada locations are no longer accepting Visa as a payment option after the companies failed to reach an agreement on an acceptable fee for Visa transactions, and we've seen one major U.S. court settlement on the issue, but that settlement was mired in controversy and recently struck down by an appeals court. That settlement would have benefited retailers directly, rather than card users, and it largely has been criticized as meaningless to the broader mission of trying to get the card companies to stop charging high fees.
If the U.K. lawsuit proceeds, and even results in some money being passed on to cardholders, those backing the suit still will need to take a look around and see if anything has really changed.