Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC investigating MasterCard’s interchange fees, (Jul 9, 2015)

By Jody Coultas, J.D.

The European Commission (EC) sent a Statement of Objections to MasterCard concerning MasterCard's rules that prevent banks from offering lower interchange fees to retailers based in another member state of the European Economic Area, where interchange fees may be higher. The Statement of Objections also alleges that MasterCard's interchange fees for transactions in the European Union (EU) using MasterCard cards issued in other regions of the world breach European antitrust rules by setting an artificially high minimum price for processing these transactions.

Every time a consumer uses a payment card in a shop or online, the bank of the retailer (the acquiring bank) pays an interchange fee to the cardholder's bank. The acquiring bank passes the interchange fee on to the retailer who includes it, like any other cost, in the final price charged to the card holder. European consumers and businesses make more than 40 percent of their non-cash payments per year through payment cards.

Interchange fees vary considerably from one member state to another. MasterCard's rules prevent retailers in a high-interchange fee country from benefitting from lower interchange fees offered by an acquiring bank located in another member state. The Commission is concerned that MasterCard's rules on cross-border acquiring limit banks' possibilities to compete cross-border on price for services to receive card payments and so restrict competition in breach of EU antitrust rules, leading to higher prices for retailers and consumers.

The Commission also believes that the high levels of MasterCard's "inter-regional interchange fees" are not justified. These fees are paid by an acquiring bank for transactions made in the EU with MasterCard cards issued in other regions of the world. The Commission is concerned that these high inter-regional fees increase prices for retailers and may in turn lead to higher prices for products and services for all consumers, and not only those using cards issued outside the EU or paying with cards.

An investigation into Visa Inc.'s inter-regional interchange fees is currently ongoing. The EC announced on May 14 that it will market test the commitments, which Visa offered in response to the EC’s supplementary Statement of Objections asserting a possible violation of European Union antitrust rules.

News: Antitrust