Visa and Mastercard face a fresh legal battle in the UK after a London tribunal greenlit lawsuits brought by merchants alleging overcharges on interchange fees, Reuters reported. The Competition Appeal Tribunal ruled that collective lawsuits against Visa and MasterCard can proceed.

Merchants' Claims to Proceed

This decision is pivotal, as it allows a broad range of merchants to join forces in claiming damages. The lawsuits challenge the multilateral interchange fees charged by the two payment giants when consumers use their cards for purchases.

This is not the first time Visa and Mastercard have encountered legal challenges over such fees. The two companies have already been involved in numerous lawsuits across the UK. These cases revolve around the fees known as multilateral interchange fees, which retailers are obliged to pay whenever customers use their cards.

Previously, the tribunal reportedly rejected the certification of these cases under the UK's collective proceedings regime, similar to class actions in the United States. The decision was based on concerns over the claims' alignment and procedural requirements. However, the tribunal has changed its stance, allowing the claims to move forward.

The tribunal's ruling could have far-reaching implications for Visa and Mastercard's operational and financial strategies in the UK. If the merchants succeed in proving their claims, the two companies could face substantial financial liabilities. This development may also prompt a reevaluation of their fee structures and payment practices.

With the tribunal's decision, the next steps involve detailed proceedings where evidence will be presented and examined. Retailers across the UK are reportedly following this development as a favorable outcome could lead to refunds and changes in how interchange fees are structured.

Transaction Fees and Cost of Doing Business

Last month, the UK's payments regulator raised concerns about fee hikes imposed by Visa and Mastercard on retailers, underscoring a lack of competitiveness in the payment card market. The regulator said that despite the fee hikes, there was reportedly little evidence that these costs have led to better services.

The Payment Systems Regulator (PSR) proposed new measures to enhance transparency and competition. The regulators' investigation noted that over the past five years, the fees charged by these two companies have increased by more than 30% after accounting for changes in transaction volumes.

In 2022, card transactions in Britain totaled 27.1 billion, amounting to £954 billion. The PSR's interim report estimates that the fee increase has added over £250 million annually to the cost of business in the UK. Mastercard and Visa accounts for 95% of UK-issued card transactions.

Besides that, Visa and Mastercard recently agreed to pay $197 million to settle a class action lawsuit brought by millions of consumers for allegedly keeping cash access fees artificially inflated.