MasterCard, Co-op, Burberry: Business news in brief, Thursday 19 January

London court hears allegations credit card firm ‘overcharged millions’; Mutual group hails bumper Christmas; Luxury brand sees profits soar, fuelled by Brexit

The credit card firm fighting legal action that could cost it up to £14bn in compensation payouts (Bloomberg News)

Mastercard ‘preying on millions’ sparked £14bn fee lawsuit

Mastercard preyed on more than 46 million unknowing consumers by unfairly charging card fees over a 16-year period, lawyers seeking to bring a £14bn joint legal action told a London court.

The credit-card company infringed European Union competition law by imposing high charges to retailers that accepted its cards between 1992 and 2008, Paul Harris, a lawyer for consumers, told the Competition Appeal Tribunal Wednesday. The panel will hold a two-day hearing to decide whether the matter should go to a full trial. It would be the UK’s biggest class action and one of the first filed under the Consumer Rights Act 2015.

“It is difficult to be able to see why Mastercard should be able to prey on millions of people, what’s more without these people knowing they were being injured,” Harris said. “This is the archetypal case that the government had in mind when creating this new regime.”

Mastercard has faced numerous lawsuits since EU courts said the company’s fees for cross-border payments unfairly restricted competition. The firm said that a cap imposed by the European Commission on what it charged retailers to process transactions on foreign transactions would shift the burden onto customers, an argument the Court of Justice rejected and opened the door to collective lawsuits from consumers.

The lawsuit was initiated by Walter Merricks, a lawyer who once led the Financial Ombudsman Service – which handles consumer disputes with banks – and law firm Quinn Emanuel Urquhart & Sullivan.

Bloomberg

Co-op is back after revealing surge in sales during Christmas period

The Co-operative Group declared it was “back” after cheering surging sales in its Christmas quarter, boosted by a push to sign up more customer members.

The supermarkets-to-funeral services mutual said its retail chain saw like-for-like food sales rise 3.4 per cent in the final quarter of the year, boosted by a 4 per cent increase at its core convenience stores.

It also cheered a 17 per cent jump in direct motor insurance sales and a 73 per cent hike in pre-paid funeral plan sales between 21 September and 31 December.

The group now plans to bring forward its goal for one million new customer members by a year after signing up another 400,000 in the past four months alone.

It launched the new customer member drive in September, with aims to reach the target by the end of 2018, but said it will now look to hit its goal by the end of this year.

The group’s robust end-of-year performance comes as the Co-op stages a turnaround after nearly collapsing in 2013 following the discovery of a £1.5bn financial hole in its bank business.

Rufus Olins, chief membership officer at the Co-op, said: “The Co-op is back and our members and our communities are once again at the heart of all we do.

“In looking to grow our membership significantly in 2017, we are in effect looking to grow the Co-op economy, and the very positive impact it can have in communities throughout the UK.”

PA

Goldman Sachs results beat estimates, helped by trading

Goldman Sachs reported fourth-quarter earnings that beat analysts’ forecasts on Wednesday as the bank recovered from a difficult quarter a year earlier. Results were particularly strong at Goldman’s trading desks in the last three months of the year.

The New York-based investment bank earned $2.35bn (£1.91bn), or $5.08 a share, compared with $765m (£620.59), or $1.27 per share, in the same period a year earlier. Last year's results included a $5bn legal settlement with the Department of Justice related to the bank's dealings during the housing bubble and financial crisis.

The results beat analysts' expectations of $4.76 per share.

“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” chief executive Lloyd Blankfein said in a statement.

Like Morgan Stanley, which reported its results on Tuesday, Goldman had a strong quarter in its trading operations, benefiting from a market rally following the US presidential election.

In Goldman's institutional client services division, which includes the firm's trading desks, revenue surged 25 per cent to $3.6bn. Revenue in its fixed-income, currencies and commodities division jumped 78 per cent to $2bn.

AP

Burberry sales soar by 40% as foreign tourists cash in on Brexit-hit pound

Luxury fashion group Burberry hailed an “exceptional” festive performance in the UK as booming tourist trade helped send sales surging by around 40 per cent.

The group – famous for its trench coats and check scarves – said it continued to receive a boost from tourists flocking to London to take advantage of the Brexit-hit pound, while a well-received advertising campaign also helped drive strong demand from UK customers.

Burberry said the UK performance contributed to a 3 per cent rise in overall comparable sales across the group in the three months to 31 December, with an improvement in some under-pressure markets including Hong Kong and France.

Christopher Bailey, chief creative officer and outgoing chief executive of Burberry, said: “With a record number of views of our festive film and strong demand for new products in our collections, this third-quarter improvement reflects early progress from our plans to drive Burberry's performance for the long term.”

AP

UK financier makes new offer to take over Tata Steel pension scheme

British financier Edi Truell has renewed an offer to take over Tata Steel's giant UK pension scheme in a deal that he says would allow members to keep benefits in full.

Tata Steel, Britain’s largest steelmaker, is in talks with stakeholders about spinning off its British Steel Pension Scheme into a standalone entity and cutting benefits for all 130,000 members.

The steelmaker is under pressure to end its obligations to the £15bn scheme as it is in merger talks with Germany's Thyssenkrupp, which is not prepared to take on Tata’s UK pension obligations.

Truell told Reuters he could preserve members' benefits by plugging the pension fund's deficit through investment in high-yielding infrastructure projects instead of index-linked gilts.

Reuters

Amazon said to walk away from $1bn souq.com takeover

Amazon and India’s Flipkart have walked away from talks to acquire Dubai-based Souq.com after disagreeing over price, according to two people with knowledge of the matter.

The e-commerce business is now seeking other potential investors and is negotiating with mall-operator Majid Al Futtaim, one of the people said, asking not to be identified as the talks aren’t public.

US online retail giant Amazon entered talks with Souq.com last year in a deal that would have been worth about $1bn (£810m), people with knowledge of the matter said in November. The Middle Eastern company’s existing investors include Tiger Global Management and South Africa’s Naspers. Souq.com appointed Goldman Sachs to find buyers for a stake last year, according to people familiar with the matter.

Souq.com became the highest valued Internet company in the Middle East after a $275m (£223m) funding round in February 2016, according to Standard Chartered, which has invested in Souq. The company sells more than 1.5 million products online to customers in countries including the United Arab Emirates, Egypt and Saudi Arabia.

Bloomberg

VW will appeal court order to buy back customer’s diesel car

Volkswagen says it will appeal against a court’s decision that it should buy back a German customer's diesel car.

Nicolai Laude, a VW spokesman, said Wednesday that the company expects the Hildesheim verdict to be overturned. VW noted that other courts had reached opposite decisions in previous cases.

In its verdict Tuesday, the Hildesheim regional court ruled that the plaintiff was entitled to receive the full purchase price of €26,499 (£23,000) which he’d paid for a Skoda Yeti 2.0 TDI in 2013. If upheld, that could be a costly precedent for the automaker.

The judges said the automaker had acted “indecently,” and compared Volkswagen's deceit to past cases of vintners mixing antifreeze in wine or companies putting horse meat in lasagna.

AP

Airbnb among rental platforms sued in France for alleged unfair practices

A group of French hoteliers and real estate agents has launched a lawsuit targeting accommodation-rental platforms, including Airbnb, arguing that their practises amount to unfair competition.

Lawyer Guillaume Navarro said they want French authorities to impose the same rules on them as those regulating the traditional rental market.

The group, which targets other vacation rental portals like HomeAway and Wimdu, is accusing the platforms of offering a string of tourism services, including tour operator and insurance services, without proper authorisation.

Navarro told The Associated Press on Wednesday that the online platforms are making the most of a “grey zone” in which they are not on the same level playing field with competitors to save money and tedious paperwork.

France is the world's second biggest Airbnb market after the United States.

AP