A High Court ruling has dismissed legal challenges from Mastercard, Visa and Revolut, confirming the Payment Systems Regulator’s (PSR) authority to impose price caps on outbound cross-border interchange fees under existing UK law.
The UK’s High Court has upheld the statutory powers of the UK’s payments watchdog, confirming the Payment Systems Regulator can impose price caps on cross-border interchange fees using its existing regulatory toolkit.
In a judgment handed down on January 15, Mr Justice Cavanagh dismissed judicial review challenges brought by Mastercard, Visa and Revolut, ruling the PSR acted within its legal authority when it proposed capping outbound cross-border interchange fees charged on card-not-present transactions.
In a statement following the ruling, Matrix Chambers, which represented the PSR, said the court had confirmed the regulator’s power to impose price caps on cross-border interchange fees using general directions under section 54 of the Financial Services (Banking Reform) Act 2013.
It had been disputed this such measures required a market investigation by the Competition and Markets Authority (CMA).
Challenge to PSR authority rejected
The claimants argued section 54 did not permit the PSR to introduce what they characterised as intrusive price regulation through general directions. They contended the UK Parliament could not have intended such powers to be exercised without the procedural safeguards attached to other regulatory tools, including formal market investigations.
The court rejected this interpretation. Mr Justice Cavanagh said the legislation clearly permitted such intervention, noting that “the wording of section 54(2)(a) is sufficiently broad to encompass the imposition of price caps on interchange fees”.
The judgment found that the PSR’s proposed intervention was directed squarely at promoting competition and protecting service users, which are core objectives set out in the 2013 Act. The court also dismissed arguments that the absence of statutory appeal rights for general directions indicated Parliament intended to exclude price regulation from the scope of section 54.
Section 108 arguments also dismissed
Mastercard and Revolut advanced a second line of challenge, arguing that section 108 of the Act prevented the PSR from exercising its section 54 powers in circumstances where the Payment Services Regulations 2017 applied.
The court again found in favour of the regulator. It held that section 108 was not engaged because the purpose of the proposed price caps was not to enable access to, or participation in, payment systems, but to address competition concerns and protect service users.
In doing so, the court distinguished the case from R (Notemachine UK) v Payment Systems Regulator [2023], where the regulatory intervention under scrutiny was directly concerned with maintaining access to payment infrastructure.
“It is not sufficient that the actions of the PSR may have an impact upon access or participation. What matters is the regulator’s motivating objective,” the verdict said. “In Notemachine, the PSR’s purpose was to maintain and widen access to the payment system. That is not the case here.”
Background to the dispute
The legal challenge followed a PSR market review into outbound cross-border interchange fees, which found default fees for UK-to-EEA online card transactions had risen sharply in the years following the UK’s exit from the European Union. The regulator concluded the increases were not justified by costs or competitive pressures and were imposing an estimated £150m to £200m annual burden on UK merchants and their customers.
In response, the PSR proposed introducing price caps through a general direction, prompting the card schemes and Revolut Bank to seek judicial review of the regulator’s powers before any cap was set.
While the judgment does not determine the level at which any interchange fee cap should be set, it removes a key legal obstacle to the PSR’s approach. The court’s decision confirms that the regulator does not need to rely on a CMA market investigation to pursue targeted price interventions where it identifies competition or consumer harm.
The PSR, represented during the case by Jessica Simor KC, Nicholas Gibson and Suzanne Rab, previously stated it will continue its analysis of appropriate fee levels following consultation, now with legal certainty over its authority to act. the PSR.
The claimants have not yet indicated whether they intend to seek permission to appeal.
