Tesco Stores Ltd and Others v Mastercard Incorporated and Others (Defendant/Applicants)

JurisdictionEngland & Wales
JudgeMrs Justice Asplin
Judgment Date24 April 2015
Neutral Citation[2015] EWHC 1145 (Ch)
Docket NumberCase No: HC14C00795 and HC14D02587
CourtChancery Division
Date24 April 2015
Between:
(1) Tesco Stores Ltd
(2) Dobbies Garden Centres Ltd
(3) One Stop Stores Ltd
Claimants/Respondents
and
(1) Mastercard Incorporated
(2) Mastercard International Incorporated
(3) Mastercard Europe S.P.R.L.
(4) Mastercard/europay UK Ltd
Defendant/Applicants

[2015] EWHC 1145 (Ch)

Before:

The Hon Mrs Justice Asplin DBE

Case No: HC14C00795 and HC14D02587

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

David Railton QC, Tim Ward QC and Rob Williams (instructed by Humphries Kerstetter) for the Claimants/Respondents

Mark Hoskins QC and Matthew Cook (instructed by Jones Day) for the Defendants/Applicants

Hearing dates: 25–27 March 2015

Mrs Justice Asplin
1

This is an application for summary judgment/strike out pursuant to CPR 24/3.4(2) which is made by the First, Second, Third and Fifth Defendants, together referred to as "the MasterCard Defendants" on the basis that the claims brought by Tesco Stores Ltd and others have no real prospect of success/ there are no reasonable grounds for bringing the claim as a result of the principle in English law of ex turpi causa. The additional ground in the application notice that the claims were barred in whole or part as a result of the Limitation Act 1980 has since been dealt with by agreement. The claims in relation to the Fourth Defendant have been settled.

The Claim and the Application

(i) Outline

2

The Claimants seek damages for breaches of European and domestic competition law in relation to the MasterCard Defendants' imposition of multilateral interchange fees ("MIFs") in the course of operating the MasterCard credit card system. The Claimants (which are all wholly owned subsidiaries within the Tesco group but which are not otherwise related to each other by way of mutual shareholding) claim that MIFs were the result of an anti-competitive agreement or decision of an association of undertakings, resulting in them being set at too high a level. They contend that the MIFs were ultimately passed on to them and seek damages in respect of what they contend is the "overcharge" and a declaration as to the validity of the MIFs.

3

However, it is said on behalf of the MasterCard Defendants that Tesco Bank (which is another wholly owned subsidiary within the Tesco group but which is not a claimant) has carried out and continues to carry out all of its MasterCard business on the basis of the MIFs which the Claimants are contending are anti-competitive and excessive. Further, it is said that both the Claimants and Tesco Bank have promoted the use of Tesco Bank MasterCards in Tesco group stores and approximately half of the sums claimed by the Claimants relate to MIFs which were in fact paid to Tesco Bank. The MasterCard Defendants go on to contend that the Claimants and Tesco Bank are part of a single economic entity which through Tesco Bank is a participant in the alleged illegal conduct upon which the claims are based. In such circumstances, the MasterCard Defendants say that the claims are barred by the maxim ex turpi causa and as a result, they are entitled to summary judgment or alternatively, that the claim should be struck out.

(ii) The regime and the Claims in more detail

4

The MasterCard Defendants are companies within the MasterCard group of companies. The MasterCard scheme provides debit and credit card payment products. MasterCard licenses banks and financial institutions to provide the credit cards. Licensees specialise in transacting either with merchants (referred to as acquiring) or with consumers (referred to as issuing) or do both. It is not in dispute that in an ordinary transaction under the MasterCard scheme: a customer presents his MasterCard payment card to a merchant by way of payment; the merchant then seeks payment from his "acquiring bank"; the acquiring bank seeks payment from the customer's "issuing bank"; and the issuing bank seeks payment from the customer. As part of this scheme: acquiring banks pay MIFs to the issuing banks. MasterCard sets or makes provision for setting interchange fees which apply in the absence of a bilateral agreement between the parties. In addition, merchants pay merchant service charges ("MSCs") to their acquiring banks in return for the services provided to them. MIFs payable in relation to transactions where a credit card is issued in one EEA state and used at a merchant in a different state are referred to as Intra-EEA MIFs. UK MIFs arise where the credit card is issued and the merchant is based in the United Kingdom.

5

By a decision dated 19 December 2007 the European Commission found that the Intra EEA MIFs set by MasterCard between 1992 and December 2007 constituted a breach of Article 81 of the EC Treaty (now Article 101 TFEU) (the "Decision"). The Decision was upheld on appeal by the General Court ( Case T-111/08 MasterCard & Ors v Commission EU:T:2012:260) and the Court of Justice of the European Union (the "CJEU") in Case C-382/12 P MasterCard Inc & Ors v Commission, judgment of 11 September 2014. Following the Decision in June 2008, MasterCard reduced the Intra EEA MIF to zero on a temporary basis while discussions continued with the Commission. Further to those discussions, in July 2009 MasterCard then increased the Intra EEA MIF to a positive but lower level than those considered in the Decision.

6

There are two related claims before the court, one of which is brought by Tesco Stores Limited ("Tesco Stores") and One Stop Stores Limited (the "Tesco Stores Claim"). The other is brought by Dobbies Garden Centres Ltd (the "Dobbies Claim"). As I have already mentioned each of the Claimants is a wholly owned subsidiary of Tesco plc and have been termed "sister" and "cousin" companies. The Tesco Stores Claim was issued on 21 February 2014 and the Dobbies Claim on 30 June 2014. The Tesco Stores Claim both related originally to a period from 22 May 1992 but have since been restricted to the period of six years prior to the start of the respective Claims. That period postdates the period of the infringement found by the Commission in the Decision. However, it is contended in both Claims that the reasoning set out in the Decision applies equally to the subsequent Intra EEA and UK MIFs set by MasterCard so as to render such MIFs unlawful.

7

In fact, the Claimants contend that the level of Intra EEA MIFs for the periods from 21 February 2008 to 12 June 2008 and from 1 July 2009 onwards, was a decision of an association of undertakings which infringed Article 101(1) TFEU; and the UK MIF was set by an agreement or concerted practice between undertakings and/or a decision of an association of undertakings which infringed Article 101 TFEU and the Chapter I prohibition under the Competition Act 1998. The Claimants contend that the MIFs actually set were higher than they should have been and insofar as the MIFs paid by their acquirers were higher than they should have been, the MSCs which the Claimants paid in turn to their acquiring banks were also higher than they should have been. The Claimants claim both ordinary damages, exemplary damages and a declaration to the effect that EEA and UK MIFs imposed in MasterCard transaction are void and unenforceable are sought.

8

Mr Hoskins is not seeking summary judgment in respect of the declaration but submits that that part of the case will wither away if he is successful in his application in relation to the damages which are claimed.

The Court's approach to applications under CPR Parts 3.4 and 24

9

The relevant principles on applications under CPR Rule 3.4(2) to strike out statements of case and under Rule 24(2)(a)(i) for summary judgment are well known and are not controversial. On an application to strike out it is necessary to decide whether the whole or a material part of the Statement of Case discloses no reasonable grounds for bringing the claim. One of the most recent summaries of the relevant principles applicable on an application for summary judgment is contained in the judgment of Simon J in Arcadia Group Brands Ltd & Ors v Visa Inc [2014] EWHC 3561 (Comm) at [19]. He referred to the much quoted summary of the relevant principles found in the judgment of Lewison J (as he then was) in Easy Air Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) and in addition went on:

" … For present purposes it is sufficient to identify 8 points which are of potential relevance to the present applications.

(1) The Court must consider whether the Claimants have a 'realistic' as opposed to a 'fanciful' prospect of success, see Swain v. Hillman [2001] 1 All ER 91, 92.

(2) A 'realistic' prospect of success is one that carries some degree of conviction and not one that is merely arguable, see ED & F Man Liquid Products v. Patel [2003] EWCA Civ 472 at [8].

(3) The court must avoid conducting a 'mini-trial', without the benefit of disclosure and oral evidence: Swain v. Hillman (above) at 95.

(4) The Court should avoid being drawn into an attempt to resolve conflicts of fact which are normally resolved by a trial process, see Doncaster Pharmaceuticals Group Ltd v. Bolton Pharmaceutical Co 100 Ltd [2006] EWCA Civ 661, Mummery LJ at [17].

(5) In reaching its conclusion, the Court must take into account not only the evidence actually placed before it on the application for summary judgment, but the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v. Hammond (No. 5) [2001] EWCA Civ 550 at [19].

(6) Some disputes on the law or the construction of a document are suitable for summary determination, since (if it is bad in law) the sooner it is determined the better, see the Easyair case. On the other hand the Court should heed the warning of Lord Collins in AK Investment CJSC v. Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804 at [84] that it may not be appropriate to decide difficult...

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