Legal Business Blogs

Disputes round-up: Links and Milbank secure win on high-stakes Visa dispute as High Court rules against Morrisons on data breach

Linklaters and Milbank, Tweed, Hadley & McCloy have successfully defended client Visa in a claim brought by Sainsbury’s, with Mr Justice Phillips ruling for the first time that interchange fees do not affect competition.

The case which concluded yesterday (30 November) initially saw a number of retailers led by the Arcadia Group claim that fees charged to them each time a customer pays using a credit or debit card breached UK and EU competition law. By the time of the closing submission in February, all claimants had settled except Sainsbury’s, which instructed Morgan, Lewis & Bockius.

Linklaters disputes partner Tom Cassels and Milbank London co-managing partner Julian Stait led the teams co-counselling Visa, while Morgan Lewis London managing partner Frances Murphy acted for Sainsbury’s.

This judgment follows a ruling in favour of another credit card operator, Mastercard, handed down in January for a claim brought by the Arcadia Group.

But while in that case Mr Justice Popplewell held that interchange fees were restrictive of competition but objectively necessary, yesterday’s judgment said they are not anti-competitive by their nature. Phillips said competition between banks to service Sainsbury’s is very strong, and there is no evidence it would be any different if there were no interchange fees: ‘Sainsbury’s claim therefore fails in its entirety.’

A spokesperson for Sainsbury’s said the retailer maintained Visa breached competition law and damaged Sainsbury’s, adding it was ‘disappointed by the decision’. The retailer requested and obtained permission to appeal and is now considering its position.

There have been a number of previous cases brought against Mastercard across Europe for credit card fees. The General Court and Court of Justice of the European Union found that Mastercard’s fees were restrictive of competition.

Sainsbury’s relied upon those cases in its successful claim against Mastercard in July last year, in which the credit card operator was ordered to pay £68.5m in damages.

But yesterday’s ruling took a different approach, distinguishing the European cases and setting a new precedent determining that Visa’s UK interchange fees are not restrictive of competition.

The decision came as the High Court today (1 December) found retail giant Morrisons liable for a mass data leak that took place in 2014, when then-employee Andrew Skelton released the salary and bank details of nearly 100,000 staff. The claimants, a group of 5,518 Morrisons employees, brought the group action and were represented by Manchester law firm JMW Solicitors. DWF disputes consultant Andrew Harris advised Morrisons.

Mr Justice Langstaff ruled that while Morrisons did protect the data of its employees and that the leak was not the company’s fault, it was vicariously liable. In his judgment, Langstaff said: ‘The point which most troubled me in reaching these conclusions was the submission that the wrongful acts of Skelton were deliberately aimed at the party whom the claimants seek to hold responsible, such that to reach the conclusion I have may seem to render the court an accessory in furthering his criminal aims.’ Langstaff granted Morrisons leave to appeal.

Andrew Moir, global head of cyber security at Herbert Smith Freehills, told Legal Business: ‘The case is significant because it is the first successful class action in the UK arising from a data breach, and establishes the principle that companies can be vicariously liable for “inside-jobs” perpetrated by their employees. It also paves the way for those affected by data breaches to claim damages for any distress caused, even if they have not suffered any financial loss as a result of the breach.’