The General Court of the EU has ruled that the
multilateral interchange fees (MIFs) levied by MasterCard are
contrary to competition law.
MIFs are multilaterally agreed inter-bank fees
charged by a cardholder’s bank to a merchant’s bank for each card
transaction made at the point of sale (POS).
Go deeper with GlobalData
The Court’s decision confirms a 2007 decision
of the European Commission (EC) that prohibited MasterCard’s MIFs
as they could constitute an anticompetitive business practice.
The EC ruled that such fees inflated the cost
of card acceptance by merchants without leading to benefits for
consumers.
Joaquin Almunia, EC’s VP and Competition
Commissioner said:
“The judgment confirms that banks, in the
framework of a card payment scheme, cannot restrict competition by
agreeing on certain charges to the detriment of consumers.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“This development also confirms the
Commission’s efforts to limit interchange fees to acceptable
levels.”
Almunia added that MIFs not only impact
consumers but are also an obstacle in the run up to the single
payments market (SEPA).
In April 2009 the Commission and MasterCard
reached an interim agreement to settle the case pending the outcome
of the appeal.
This agreement introduced a weighted average
MIF at no more than 0.30% for credit cards and 0.20% on debit
cards. The agreement expires on 24 May.
The British Retail Consortium (BRC), a
party in the proceedings argued that MIFs
are an unjustifiable tax on retailers and consumers as they exceed
the costs of processing card transactions.
Stepehen Robertson, BRC’s director general
said:
“This is a historic decision on card charges
for transactions between European nations but what comes next is
crucial. And that should be fairer costs for customers and
retailers whenever they pay by card.
Roberston added: “People deserve the same
treatment on card charges when buying within the UK. Hundreds of
millions of pounds are at stake”.
MasterCard Europe said that it disagreed with
the General Court’s decision and argued that the finding could make
payments more expensive for consumers and threaten electronic
payment technologies in Europe.
Javier Perez, MasterCard Europe’s president
told CI:
“The whole reason of the interchange fee is
that the different players benefiting from a payment transaction
pay their fair share for that service. The consumer is able to pay
for a transaction and the retailer is able to get paid for a
purchase”.
Perez highlighted what happened in Australia,
where the National Bank forced the reduction of interchange fees in
2003, and said:
“Retailers did not reduce the cost of the
products they were selling and Australian consumers were hit by
incremental bills of up to half a billion Australian dollars.”
Perez added: “As a consumer let me ask you the
following question. Do you prefer to pay half a billion now and
maybe get it back latter or do you prefer not to pay the half a
billion?”.
Regarding the EC’s claims that interchange
fees are an obstacle for the single payments market, Perez
commented that on the contrary, MIFs are an “enabler” that “made
possible for cross border payments to exits today”.
Perez said that interchange fees have paved
the way for SEPA by allowing card payments in countries with
different level of development and different costs of processing
electronic transactions.
MasterCard has announced its intention to
appeal to the Court of Justice. The payment network has two moths
and ten days to lodge an appeal. On average an appeal
can take about 18 months to be determined.
