Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Parliament might cap interchange fees for card-based payments, (Mar 10, 2015)

By Greg Hammond, J.D.

The European Parliament is expected to formally adopt a regulation capping interchange fees for payments involving consumers’ debit and credit cards before summer this year, a move that the European Commission welcomes. The “Regulation on Interchange Fees for Card-based Payment Transactions,” if adopted, could lead to an approximate €6 billion reduction annually in hidden fees. In addition, the EC suggests that the Regulation could offer consumers more freedom of choice, enhance transparency for card transactions, and support the development of innovative payment technologies.

Interchange fees are charges that are hidden from consumers and typically paid by a retailer’s bank to a consumer’s bank for each transaction involving a credit or debit card. The interchange fee is then deducted from the final amount the retailer receives from its bank. However, in September 2014, the European Court of Justice declared that interchange fees violate EU antitrust rules. Consequently, the Regulation was drafted to assist the card payments industry in moving from current business practices to a newer, more competitive system in order to benefit banks, consumers, and merchants.

The Regulation, as a general rule, will cap interchange fees at 0.2 percent of the transaction value for consumer debit cards and at 0.3 percent for consumer credit cards. Member States, however, will have the flexibility to establish lower percentage caps and to impose maximum fee amounts. The Regulation also would increase transparency with regard to fees and will improve competition for payment card schemes. Finally, the Regulation will support technological innovation in payment options by eliminating uncertainty over the rules concerning interchange fees.

“For too long, uncompetitive and hidden bank interchange fees have increased costs of merchants and consumers,” stated Commissioner in charge of competition policy, Margrethe Vestager. “Today’s vote has brought us another step closer to putting an end to this. This legislation will put a cap on interchange fees, make them more transparent and remove a hurdle to rolling out innovative payment technologies. It is good for consumers, good for business and good for innovation and growth in Europe. As cards are the most widely used means of online payment, this Regulation is also an important building block to complete the European Digital Single Market.”

News: Antitrust