Sainsbury’s v. MasterCard establishes the pass-on “defence” in English/UK law. The Competition Appeal Tribunal set out a two-part test which it erroneously distinguished from the economists’ notion of pass-on. It then went on the develop key elements of legal test for pass-on in price fixing cases. This article critically assesses the Tribunal’s judgment within a law and economics framework. It provides a rounded interpretation of pass-on as both a defence and offence, the different evidentiary standards and principles used, and the potential for inconsistency which could see defendants liable to claims more than the overcharges.
Sainsbury’s Supermarkets v MasterCard1 is the first definitive judicial decision that establishes the pass-on “defence” in English competition law. Despite this welcome clarification, the Competition Appeal Tribunal’s (CAT) reasoning is far from clear and has led to confusion. This article clarifies the Tribunal’s legal test, apart from incorrectly distinguishing economic and legal pass-on, only applies when pass-on is pleaded as a “defence”. It is expressly not applicable when pass-on is used by indirect purchaser to support an action for damages. The differing evidentiary standards adopted by the Tribunal led it to reject MasterCard’s pass-on defence while accepting that 50% of the same overcharge had been passed on to Sainsbury’s customers when awarding interest. While there may be good legal and procedural grounds for adopting this bifurcated approach; it also lacks coherence since it exposes MasterCard to potential damages 1.5 times greater than the overcharge.