Emma Walsh and Leonidas Theodosiou, Morgan Lewis

When Morgan Lewis associate Emma Walsh joined the firm as a trainee in February 2016, little did she know that one of her first cases would reach the Supreme Court. Walsh qualified in September 2017, six months early, and was already deeply acquainted with the Sainsbury’s interchange fee claims against Visa and Mastercard, which culminated in the supermarket’s Supreme Court victory in June 2020.

Representing Sainsbury’s, Morgan Lewis partner Frances Murphy (named among this year’s Hot 100) has led the dispute through the Competition Appeal Tribunal, High Court, Court of Appeal and Supreme Court, with Walsh, and fellow associate Leonidas Theodosiou, assisting throughout.

“I have been very fortunate to have worked on this case since I was a trainee solicitor and therefore, I have seen the case evolve as it commenced in the High Court and progressed through the Court of Appeal and then up to the Supreme Court”, says Walsh. “Every hearing has been memorable, not least the High Court hearing at which the other claimant withdrew its claim against Visa in the final moments.”

She continues, “As a junior lawyer embarking on my career some years ago, I could not have imagined gaining such a wealth of quality experience so early in my career. Many litigators will never in their professional career get the opportunity to represent a client in a claim that progresses all the way through from the High Court up to the Supreme Court. To have done so, and in such an important case, so early in my career is something that will inform the advice I am able to provide to clients, how I handle their matters from a project management perspective and will enable me to share my learning with my colleagues. This case has also given me confidence that, where settlement is not achieved in any future litigation, I can help clients successfully navigate proceedings at every level of the English Courts.”

Likewise, for Theodosiou, who joined Morgan Lewis in February 2017 having qualified in Clifford Chance’s Brussels office in 2013, this case will always stand out. “A case (and victory) of such importance no doubt marks a significant milestone in one’s career”, he says. “In terms of future work, the Supreme Court’s judgment opened the “pouch of Aeolus”, encouraging hosts of firms, including many of our clients that had been paying unlawful rates of interchanges fees, to issue claims against Visa and Mastercard. I look forward to pursuing these claims on behalf of our clients in the years to come.”

Both associates, frequently assist London managing partner Frances Murphy and London practice group head and Joanna Christoforou on litigation, investigations, and compliance matters. These include several cases recently defending pharmaceutical companies. “We have travelled overseas to gather evidence, and advise clients on cartel related matters, and have defended alleged excessive pricing and alleged abuse of dominance investigations by the UK competition authority, specifically in the pharmaceutical sector”, says Walsh.

“I’ve acted as a lead associate in the Sainsbury’s v Visa proceedings; in Advanz’s challenges to CMA Search Warrants at the High Court and the Court of Appeal; in Advanz Pharma’s appeal against the CMA infringement decision in the hydrocortisone case; in claims by numerous merchants in the retail, transport and hospitality industries for competition damages against Visa and Mastercard; as well as in several state aid cases before the EU Courts”, adds Theodosiou.

Sainsbury’s v Visa case

Returning to the Sainsbury’s case, Theodosiou says, “The case involved consideration of a host of technical issues – many of which were novel. They included the circumstances in which the English courts are bound by judgments of the EU Courts; whether the standard of proof is reserved for national law and the type of evidence that is required to meet the standard of proof under English law; and the basis upon which an agreement that is restrictive of competition under Article 101(1) can be exempted under Article 101(3).

As ever, resolution of these issues required detailed, often forensic research of the law and lengthy brainstorming sessions within the legal team. We were fortunate to work alongside a knowledgeable legal team at Sainsbury’s who were at all times active partners with the external legal team.”

The case challenged the whole basis upon which credit card companies set the level of fees they charge retailers for accepting payment. The Supreme Court upheld that the multilateral interchange fees charged by the Visa and MasterCard card payment schemes are restrictive of competition and that merchants suffered damage as a result. “The issue is not retail specific, instead it spans every sector where a payment card is accepted to make a purchase instead of cash so the ramifications of these first judgments is considerable”, says Walsh. “There are scores of merchants with parallel claims for damages who will be impacted by the determinations of the courts and in respect of whom the payment card schemes could be liable for billions of pounds in damages.”

Even though the UK litigation is stand-alone, it emanates from the European Commission’s investigations into the MasterCard and Visa European Economic Area (EEA) multilateral interchange fees (MIFs) over the past 30 years. The MIFs had resulted in the Commission’s 2007 infringement decision against MasterCard, which was upheld by the General Court and the Court of Justice of the European Union (European Courts), the commitments entered into by Visa to reduce the level of its EEA MIF in 2010 and 2014, the European Commission’s 2015 Interchange Fee Regulation that capped the payment schemes’ EEA MIFs, and the investigation by the Commission in respect of the schemes’ inter-regional MIFs that culminated in 2019 in commitments by MasterCard and Visa.

While MasterCard’s MIFs have previously been found to contravene EU competition law, notably by the European Courts in September 2014, Visa offered commitments to the Commission to reduce the level of its MIFs in order to address the Commission’s concerns. Accordingly, in relation to Visa, prior to the Court of Appeal’s judgment in July 2018 there had been no English or European judgment against it that its MIFs were anti-competitive. The 17 June 2020 judgment by the Supreme Court, confirming that the MIFs at issue restricted competition within the meaning of Article 101(1) and, therefore, are unlawful unless exempted under Article 101(3), is a landmark victory for any and all merchants who have incurred unlawful interchange charges.

The Supreme Court’s judgment will have significant implications for the payment card schemes which now have a competition infringement finding against them in relation to their interchange fees from the highest court in the UK. These appeals are unprecedented and among the most significant antitrust cases in the UK to date.

Morgan Lewis guided Sainsbury’s through several issues that the appeals tested, not only the circumstances in which the English courts are bound by judgments of the European Courts but how damages are to be assessed and the basis upon which an agreement that is restrictive of competition under Article 101(1) can be exempted under Article 101(3), provided it satisfies certain conditions.

“The Sainsbury’s v Visa proceedings have now been remitted to the Competition Appeal Tribunal for assessment of the quantum of Sainsbury’s claim, with a trial slated for summer 2022”, explains Theodosiou.

“The case was unique in that it challenges the whole basis upon which the credit card companies set the level of fees they charge retailers for accepting payment by their customers using a card. Moreover, the appeals turn on points of material importance in competition law damages claims, and is of a much wider significance, including with regard to a collective damages action brought against Mastercard on behalf of UK consumers under the UK’s “opt out” regime.”

Reflecting on the monumental nature of this case, Walsh adds: “Visa and their legal counsel have been a formidable opponent in this dispute so the case has required me to approach legal issues thoughtfully and to think creatively about responding to and advancing legal arguments and team supervision as cases of this kind are complex and demanding of considerable resource, all of which requires careful project management. I have also developed my learning on the preparation of pleadings for the various Courts which often requires a different drafting style to other legal communications or client advice and the particular preferences of each court for the presentation of bundles and other logistical matters.”

The Supreme Court’s judgment has been eagerly awaited, including by the scores of claimants whose proceedings have been stayed pending the outcome of these lead cases. It determined, in relation to AAM v MasterCard, that there was no level of MasterCard interchange fee that was permissible under competition law, meaning a number of companies will want to be compensated for the overcharge they have been paying MasterCard.

Moreover, the appeals turn on points of material importance in competition law damages claims, and is of a much wider significance, including with regard to a collective damages action brought against MasterCard on behalf of UK consumers under the UK’s ‘opt out’ regime. The Supreme Court’s judgment will potentially result in billions in damages, representing a major victory for Sainsbury’s and other companies.

Reflecting on working within the confines of last year’s lockdowns, Theodosiou reflects on his general learnings from that challenging time. “While the pandemic, combined with unprecedented levels of work, has tested us on several occasions, it has also given us a lot of lessons and learnings that will be helpful to us as we go forward. Most importantly, we revisited the importance of people in our lives, including our colleagues. The pandemic highlighted how important it is to empathise, understand and support each other in the workplace – whether remote or not”.