Probe
Brussels opens MasterCard antitrust probe
Brussels opened a new front in its battle over card fees as it launched an antitrust probe into MasterCard over concerns that it was distorting competition and overcharging retailers.
The European Commission investigation will focus on fees relating to customers from outside the European Union and possible restrictions MasterCard places on retailers seeking to reduce the cross-border fees they pay.
It is the latest twist in a long and complex tussle between MasterCard and Brussels that has lasted for more than a decade. The issues raised mirror parts of a parallel commission investigation into Visa.
Alongside the commission’s actions, MasterCard and Visa are under investigation or facing court proceedings in eight EU countries. Brussels is also preparing a legislative proposal, to be published this summer, which could effectively cut fee levels, require more transparency or open access to rival payments groups.
So far the competition cases largely revolve around “interchange fees” on cross-border card payments, which a consumer’s bank levies on a merchant’s bank for retail sales transactions. However, the push for reform could soon move to relatively untouched domestic card fees.
MasterCard said it intended to “fully co-operate with the commission”. It added: “As a global electronic payments company MasterCard always aims to balance the interests of both consumers and retailers to ensure that each party pays its fair share of the costs for the benefits it receives.”
The commission’s concerns relate to the relatively higher fees that retailers typically face when handling payments from customers – such as American tourists – from outside the EU.
This issue was not touched by the commission’s 2007 decision against MasterCard, which applied to cross-border fees paid within the EU. After the ruling, MasterCard significantly cut its interchange fee rate on an “interim” basis, without accepting wrongdoing.
In a landmark ruling from the EU’s second-highest court, MasterCard lost its appeal, which had become a test of the fundamental principles of how competition law is applied to the card market.
Most consumers are unaware of the charges, which provide multibillion-euro revenue streams for card-issuing banks. MasterCard sees the charges as vital to a cheap and secure service with benefits such as insurance and loyalty rewards.
The latest commission investigation will also look at other restrictions faced by retailers, including the requirement to “honour all cards” even when premium MasterCards – such as “gold” cards – carry higher fees.
Brussels is also concerned about rules on “cross-border acquiring” within the MasterCard system that potentially stop retailers from benefiting from lower card fee rates in other EU countries. Charges on a €50 transaction can range from 10 cents in the Netherlands to 80 cents in Poland.
(Published by Financial Times – April 9, 2013)