‘No pass-on in most business sectors’ – CAT rules Visa and Mastercard have not met burden of proving that any pass-on took place by majority of merchant claimants

Less than a year on from its first landmark ruling that all multilateral interchange fees infringe competition law in the UK and Ireland, the Competition Appal Tribunal (the “CAT”) has now handed down a second judgment of comparable significance in the ongoing Merchant Interchange Fee Umbrella Proceedings. Stephenson Harwood represented the largest merchant claimant group.

On 18 February 2026, the CAT held that, barring three narrow exceptions in the sectors analysed by the CAT, the defendants had failed to prove that any multilateral interchange fees (“MIF”) were passed on by the merchant claimants to their customers in the form of higher prices. The full judgment can be found here.

The decision marks the culmination of an eight-week split trial held between November 2024 and April 2025 in which three forms of pass-on were assessed: i) acquirer pass-on; ii) merchant pass-on; and iii) supplier pass-on. The CAT concluded as follows:

i) The rate of acquirer pass-on for IC+ and IC++ contracts is 100% and that for so-called ‘blended’ acquirer contracts (where the MIF component of the MSC is not specified) is 85%.
ii) The card schemes had failed to prove any direct pass-on of the MIF to consumers through higher prices for all but three of the economic sectors analysed, with a pass-on rate of 0% therefore found.¹
iii) The defendants had also failed prove that there was any pass-on of the MIF by merchants to their suppliers.

In reaching its conclusion, the CAT considered a variety of factual and expert evidence from both merchants and economic experts. It also conducted a detailed analysis of how pass-on has been assessed across numerous cases – not just those cases relating to MIFs. The judgment therefore provides long-awaited clarification and detailed guidance on precisely what defendants must prove to be able to successfully rely on a pass-on defence moving forward.

Four of the key takeaways were:

‘Directness’ (rather than ‘proximity’, which the CAT considered to be an unhelpful and confusing term) is a necessary and important component of the test for proving factual causation. Contrary to the arguments raised by Visa, the test for proving that MIFs caused price increases as a matter of fact is more nuanced than the standard ‘but for’ test of factual causation. The Defendants were therefore required to prove that decisions on prices were directly influenced by changes in the MIF (such that it was clear that steps had consciously been taken to recover some or all of the MIF), with a mere awareness of the MIF when budgeting or price-setting considered insufficient. This also meant that the arguments of Visa and Mr Merricks that all costs – including MIFs – become variable and are accordingly passed on in the long-run were not accepted by the CAT, as only short-term pricing decisions are capable of showing the requisite direct causal connection for pass-on to be established.
The question of legal causation is focussed on whether, in circumstances where factual causation has been proven, legal policy dictates that claimants should nonetheless be entitled to claim the full amount of loss. The CAT confirmed that no such potential policy reasons arose in this case. Therefore, the only question that remained was whether a direct causal connection between changes in the MIF and pricing decisions could be established.
Evidence from economic experts must be ‘grounded in reality’. Instead of drawing solely – or perhaps even predominantly – on economic theory, expert economists should seek to explain the actual, real-world behaviour of merchants set out in the factual evidence they present. As such, their expert evidence should not focus on what economic theory suggests could or should happen in general, nor should their analysis be conducted in isolation from the facts. Rather, they should be rooted in them. These principles extend to the creation of economic models, the selection of proxies, and the development of final theses.
The overriding duty of economic experts is, and remains, to the CAT and not the parties instructing them. In practical terms, this means experts should accept when other experts make valid observations and be prepared to acknowledge weakness in their own positions. They should also present their evidence, both written and oral, in a concise, focussed manner that avoids the potential for disproportionately long experts reports and responses during cross-examination. In this regard, the CAT re-iterated much of what is detailed in its recent Practice Direction on expert evidence, which was published in December 2025.

With the questions of liability and now pass-on resolved (subject to any appeals), the CAT’s attention will soon turn to Trial 3 which is expected to be held in the second half of 2027. This trial will hear arguments relating to exemption, where the card schemes will seek to justify the charging of MIFs by reference to the alleged benefits and efficiencies that doing so brings. In due course, the CAT will also be required to rule on the applicability of its prior findings to claims governed by foreign laws – to date, its judgments have been confined to the UK and Ireland – although precisely when this will be determined is yet to be established. What is clear however, even with the CAT’s ruling on pass-on now known, is that the Umbrella Proceedings still have some way to go before they reach their ultimate conclusion.

¹ For the remaining three sectors, the following pass-on rates were found: Cash services – 100%; Insurance Underwriting – 46.7%; and Travel Agents and Online Intermediaries – 47.5%

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