Mastercard and Visa are no strangers to legal action, having endured class actions and legal challenges all over the world. Currently, a collective action funded by Bench Walk Advisors accuses the credit giant of illegally overcharging Multilateral Interchange Fees (MIFs) in the UK. It has been asserted that MIFs, here charged as a percentage of each purchase, are unlawful. If the courts agree, merchants will be compensated for the money lost—possibly with interest. A similar case was recently settled in Canadian courts. Merchants across Canada will share a $131CA million settlement for businesses accepting Visa and Mastercard since 2001. Given these developments, we thought it prudent to take a look back at the Visa and Mastercard claims. What happened? How did we get here? How are litigation funders impacting the case? And what can we expect from all of this going forward? So, without further ado… The Story Behind the Case Visa and Mastercard have been accused of overcharging merchants on multilateral interchange fees, or MIFs. This fee is charged to the merchant’s bank in every credit card transaction. It also makes up the largest portion of the Merchant Service Charge—which is assessed simply so that the merchant may accept Mastercard and Visa payments from customers. Unlike other types of merchant fees, MIFs are not set with regard to market rates. In this case, the credit card companies are accused of unlawful and anti-competitive practices. Because merchants have no choice but to pay these fees, lest they forego the ability to accept credit card payments—Visa and Mastercard appear to be taking full advantage of the leverage they maintain over merchants. Merchants and banks pass these charges on to consumers, which means everyone is adversely impacted by this type of overcharging. The Upcoming UK Class Action The UK class action was launched in August of last year with funding from Bench Walk Advisors. Bench Walk is taking over for Therium Capital Management, the original funder slated to finance the exceptionally large claim, valued at GBP 15 billion. Interestingly, the Competition Appeals Tribunal (CAT) scrutinized the funding agreement, and observed that there was enough funding in the agreement to cover the potential costs of the claim, even with extensive disclosure motions. Bench Walk is said to be providing up to GBP 45.1 million in funding, with an additional GBP 15 million slated for adverse costs. The CAT has found estimated costs to be roughly GBP 32.5 million for the claim, leaving plenty in the budget should disclosure motions rain down, or the claimant class experience any additional unforeseen consequences. In August of 2021, a London court approved the class action. Claimants assert that as many as 46 million Britons may receive roughly GBP 300 each if the case is successful. As is de rigueur in funded cases, Mastercard is calling the class action “spurious” and asserting that it’s a glib and cynical ploy to make money. Ironic, no? According to financial ombudsman Walter Merricks, these consumer-focused class actions are designed to hold big businesses responsible for misdeeds. Noted class action focused firm Harcus Parker is helming the UK case, which includes merchants and customers who used credit cards between May 1992 and June 2008. In 2015, UK law capped MIFs at .3% on consumer credit transactions, and .2% for consumer debits. While the cap was not applicable to corporate or inter-regional transactions, Harcus Parker asserts that such MIFs should be zero. Bench Walk Advisors’ funding will help more than 100,000 companies pursue claims against Visa and Mastercard. The Case in Canada  Settlements with Capital One, Bank of America, National Bank, and others have been reached with merchants. Lawyers for the Canadian class action include Consumer Law Group, Branch MacMaster LLC, and Camp Fiorante Matthews Mogerman LLP. The settlement includes a provision giving merchants the ability to make surcharges (up to a cap) for the next five years minimum. This codicil seems less consumer-focused, as the end result will be customers paying surcharges with each credit card purchase. Consumers may find this especially galling, given recent inflation and a COVID-inspired increase in credit card shopping, both in-person and online. In Canada, Mastercard and Visa have settled with class action participants to the tune of $131 CAD. Merchants will be reimbursed for MIFs paid on credit transactions from 2001 forward. Smaller businesses (those which make under $5 million in yearly sales) may claim as much as $30 per year, up to a maximum reimbursement of $600. Both settlements have been approved by the courts. Meanwhile, none of the banks involved have not admitted any malfeasance. The Canadian class action did not rely on traditional litigation funding. Rather, lawyers were compensated from settlement funds as approved by the courts. Does this mean that third-party legal funding isn’t necessary for a successful class action in Canada? Not necessarily. The differences between funded class actions and cases taken on contingency can vary widely depending on the case at hand. In the United States In September of last year, Visa and Mastercard were both ordered to face antitrust class actions over MIFs by a Brooklyn judge. The class action includes claimant merchants who accepted Mastercard or Visa between 2004 and 2019. A settlement was reached in 2012, but was not approved by several large merchants. It was then overturned on appeal—resulting in a new settlement offer of a whopping $900 million more than the original settlement. A representative from Mastercard, which vociferously defended against the antitrust and unlawful fees allegations, stated that the company is pleased to have reached an agreement. That’s not surprising, given how frequently the company finds itself in court on the same type of accusation. Again, a Mastercard spokesperson asserted that the class actions were brought by “US-based lawyers and litigation funders primarily focused on making money…wasting the court’s time…” It’s noteworthy that in the US case, major retailers may see an even larger windfall. Walmart, Target, Kroger, and other large merchants have opted out of the settlement in the hopes of striking a better deal. A court has found that the credit card companies violated antitrust laws—ordering a preliminary settlement amount of between $5.5-6.25 billion. In short, US merchants may be reimbursed for interchange fees overpaid for the past 15 years. The preliminary settlement was approved by the courts. However, the Second Circuit Court of appeals has entertained objections to the settlement approval in March of this year. It’s unclear when a decision will be reached. Mastercard Around the World Mastercard in particular is no stranger to lawsuits, particularly those surrounding interchange fees. Jurisdictions around the world have pursued, or attempted to pursue, class action cases against the credit giant. These include:

• European Union: 2012—resulting in Mastercard repealing earlier pricing changes and promising greater transparency in pricing.
• France: 2009—resulting in Mastercard committing to reduce interchange fees across the board.
• Poland: 2007—determined Mastercard’s interchange fees to be unlawful, while the Protection of Competition and Consumers disagreed. An appeal is pending
• Hungary: 2009—Visa and Mastercard both found to have violated competition laws and fined $3 million.
• Italy: 2010—Mastercard fined 2.7 euros, though this was annulled the following year.
• United States: 2012—Mastercard opted out of a settlement of $7.25 billion, reducing the settlement amount to $5.7 billion. This is still a record-setting amount of an antitrust class action.

How are Litigation Funders Helping? As the appeals are being decided and the claims period draws near, a number of funders are offering post-settlement funding to claimants with payouts en route. This provides an avenue for struggling merchants to gain access to reimbursements without waiting. For small businesses hurt by rampant overcharging, this can be tremendously helpful. We can see from this that Litigation Finance can do more than ensure that class actions are funded and that claimants have their day in court. The industry can also monetize payouts, offering choices not previously available to members of a class. In short, it’s not just access to justice that the Litigation Finance industry provides, but access to much needed funds that can keep business afloat, especially during turbulent economic times. So What’s Next? All eyes will no doubt be watching for the outcome of the UK anti-competition case against Visa and Mastercard. The European Commission has already declared that Mastercard breached its duty when setting its fees, thus the meritorious nature of the claim should never have been in question. It is now up to a court to decide the culpability of the credit card giants, as per UK law. One interesting final note: you might have been wondering how a financial ombudsman such as Walter Merricks can possibly discern the specific payout that each of the 46 million or so claimants deserve? Well, the answer is he likely can’t, but that won’t affect the outcome of the case. The Supreme Court has found that the impossibility of Merricks’ task does not take defendants off the hook. Instead, Merricks may seek an aggregate award with data that affirms an appropriate amount of damage, even if he cannot apply a methodology that is fair to everyone in terms of a final payout. As opponents of the action have duly noted, the court’s ruling could potentially “open the floodgates” to a bevy of future class actions, similar in scope to what we’re witnessing here. Perhaps ironically, many in the funding community are nodding their heads, as the potential for large, US-style class actions in the UK is viewed as a positive development – greater access to justice, after all. We will continue to bring you updates on the Merricks claim as it winds its way through the UK legal system.