The Law and Economics of Pass-On in Price Fixing Cases

Abstract

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.

Keywords: Price Fixing, Pass-On, Overcharge, Causation, Counterfactuals, Unjust Enrichment, Credit Cards, Interchange Fees, Illegal Taxes, MasterCard, EU Damages Directive

JEL Classification: D4, K0, K21, L1, L4, L11, L12, L13, K14, L41, L44, N60