Merchant interchange fee UK: CAT 11 Trial 2

Bratby Law blog header: CAT 11 merchant interchange fee pass-on and the PSR cross-border cap judicial reviews

In brief. In [2026] CAT 11 (Trial 2 of the Merchant Interchange Fee Umbrella Proceedings, 18 February 2026), the Competition Appeal Tribunal found that Visa and Mastercard failed to prove merchant pass-on in all but three of the sectors analysed, and found acquirer pass-on at 100% on interchange-plus and interchange-plus-plus contracts and 85% on blended contracts. Five weeks earlier, in [2026] EWHC 64 (Admin), Cavanagh J held that the Payment Systems Regulator has power under section 54 of the Financial Services (Banking Reform) Act 2013 to cap cross-border interchange fees by general direction, and dismissed the judicial reviews brought by Mastercard, Visa and Revolut Bank UAB.

The Competition Appeal Tribunal handed down its Trial 2 judgment in the Merchant Interchange Fee Umbrella Proceedings on 18 February 2026. [2026] CAT 11 addressed pass-on, following the liability findings in [2025] CAT 37. Trial 2A concerned merchant pass-on and supplier pass-on; Trial 2B concerned acquirer pass-on. The judgment arrived five weeks after the Administrative Court, in [2026] EWHC 64 (Admin), dismissed judicial reviews by Mastercard Europe, Visa Europe, and Revolut Bank UAB that sought to quash the Payment Systems Regulator’s decision in principle to cap cross-border interchange fees. Trial 3, on the availability of the Article 101(3) TFEU exemption, is to follow.

Background: the two merchant interchange fee regimes

Multilateral interchange fees are default fees that acquirers pay issuers on each card transaction. Higher courts have held that unregulated MIFs restrict competition under Article 101(1) TFEU. UK domestic consumer card interchange is capped under the retained Interchange Fee Regulation (EU) 2015/751 at 0.2% for debit and 0.3% for credit. When the retained Interchange Fee Regulation lost effect for cross-border flows at the end of the implementation period, Visa and Mastercard increased their UK-EEA cross-border consumer card-not-present fees materially. The PSR reviewed those fees in its XBIF market review, concluded that they had reached unduly high levels, and has been consulting on a price cap remedy. In October 2025, the PSR decided not to proceed with an interim (Stage 1) cap, and moved to a longer-term (Stage 2) methodology consultation. The judicial reviews in [2026] EWHC 64 were brought against the PSR’s decision in principle that its market review conclusions warranted price-cap intervention. The CAT proceedings are civil damages claims. Both sets of proceedings turned on the same commercial fees.

Trial 2 in the Competition Appeal Tribunal

The Tribunal was concerned with pass-on: the extent to which acquiring banks passed merchant service charges through to merchants (acquirer pass-on), the extent to which merchants then passed any overcharge on to their customers (merchant pass-on), and whether merchants passed any overcharge to their suppliers (supplier pass-on). On acquirer pass-on, the Tribunal held that the rate was 100% for interchange-plus and interchange-plus-plus contracts, and 85% for blended contracts in which the MIF element of the merchant service charge is not separately identified. On merchant pass-on, the Tribunal held that the card schemes had failed to discharge their burden of proof in the great majority of sectors analysed, so that a pass-on rate of zero was found in the balance. Merchant pass-on was proved, on a sub-sector basis, only for cash services (100%, by reference to the WorldRemit evidence), insurance underwriting (47%, by reference to Allianz) and the travel agent sub-sector (47.5%, by reference to Travix). On supplier pass-on, the Tribunal similarly held that the card schemes had failed to prove pass-on. The Tribunal applied a “broad axe” to quantification. Trial 3, on whether the schemes can rely on the Article 101(3) TFEU exemption, is to follow.

The Administrative Court judicial reviews

In [2026] EWHC 64 (Admin), Mr Justice Cavanagh dismissed three coordinated judicial reviews by Mastercard Europe, Visa Europe, and Revolut Bank UAB against the PSR’s decision in principle to impose a price cap on UK-EEA cross-border consumer card-not-present interchange fees. The Court held that section 54 FSBRA permits the PSR to impose price caps by way of general direction. On the further argument that section 108 FSBRA barred the PSR from exercising its section 54 power where the Payment Services Regulations 2017 (regulation 103 on access to payment systems) occupies the field, the Court held that section 108 was not engaged because the PSR’s purpose in imposing the cap was to address competition concerns and protect service-users, not to enable access to or participation in payment systems. All three claims were dismissed. The PSR may now progress its Stage 2 methodology consultation without the overhang of the vires challenge. The level of the cap and the timing of any final direction remain to be determined by the regulator.

Implications for card scheme participants

Card schemes, issuing banks, and acquiring banks face three practical issues following these two judgments.

First, damages quantum for the pipeline of follow-on claims in the Umbrella Proceedings. The Tribunal’s finding that the card schemes failed to prove merchant pass-on, save in the three sub-sectors identified (cash services, insurance underwriting, and travel agents), means that, in the balance of sectors, claimant merchants’ damages will not be reduced on merchant pass-on grounds. Trial 3 on the Article 101(3) exemption is outstanding before final quantum can be determined.

Second, the prospective cross-border cap. The PSR can progress its Stage 2 methodology consultation without the overhang of the section 54 vires challenge. The level and scope of the cap, and its commencement date, are yet to be settled. The PSR’s MR22/2.8 methodology consultation closed in November 2025.

Third, commercial and contractual review. Card scheme participants should review their cross-border merchant pricing, their acquirer-merchant contracts, and their published scheme and interchange fee schedules for consistency with the retained Interchange Fee Regulation caps and with the PSR’s Stage 2 methodology as it develops. Safeguarding, scheme governance and pricing-disclosure issues often cluster: see our direct legal advice service for payments, product safeguarding and scheme governance.

Viewpoint

The UK case law on interchange continues to develop consistently with the Tribunal’s earlier treatment of MIFs under Article 101 TFEU. Trial 2 of the Umbrella Proceedings holds the card schemes to their burden of proof on pass-on, and finds that burden unmet save in three sub-sectors (cash services, insurance underwriting, and travel agents). [2026] EWHC 64 (Admin) confirms that the PSR’s general directions power under section 54 FSBRA extends to price-cap interventions in payment system pricing, separately from the regime in the Payment Services Regulations 2017. The substantive questions now move to Trial 3, on the Article 101(3) exemption, and to the PSR’s Stage 2 methodology consultation on the level of the cross-border cap. Scheme participants, acquirers and issuers should follow both sets of proceedings closely through 2026.