The European Commission has fined MasterCard €570,566,000 for breaching its antitrust rules by preventing merchants from accessing better conditions provided by banking institutions founded someplace else in the Single Market.
The Commissioner responsible over competition policy, Margrethe Vestager, stated: “European consumers use payment cards every day, when they buy food or clothes or make purchases online. By preventing merchants from shopping around for better conditions offered by banks in the other Member States, MasterCard’s rules artificially raised the costs of card payments, harming consumers and retailers in the EU.”
MasterCard and the Solutions It Provides
When the value of transactions and consumer card issuing is considered in the European Economic Area (EEA), MasterCard comes up as the second largest card scheme. The MasterCard scheme affords banks the ability to provide card related payment services through the use of common card brands such as Maestro and MasterCard. MasterCard serves as a platform which enables issuing banks to offer payment cards to cardholders, ensure that the card payment transaction is completed and facilitates the transfer of funds to the bank of the retailer.
The Single Market cannot do without card payments, be it for the Internet, cross-border payments or domestic transactions. When a credit or debit card is used by a consumer to make a purchase online or in a shop, the retailer’s bank (the “acquiring bank”) pays an interchange fee to the bank of the cardholder (the “issuing bank”). The retailer’s bank then sends this fee to the retailer who makes the fee part of the final prices for all consumers, which also applies to non-cardholders.
Investigation on MasterCard Operations
The rules of MasterCard compelled acquiring banks to apply the interchange fees of the retailer’s country of residence. Before Dec 9th, 2015, when the Interchange Fee Regulation introduced caps, there were varying interchange fees among the EEA countries. This made retailers in countries with high-interchange fees to miss out on lower interchange fees presented by an acquiring bank situated in another Member State.
An antitrust investigation was opened formally against MasterCard in April 2013 to assess if its ‘cross-border acquiring’ rules were in breach of the EU antitrust rules. The Commission issued a Statement of Objections in July 2015.
MasterCard: Guilty or Not?
The investigation conducted by the Commission showed that MasterCard’s cross-border acquiring rules made retailers to pay more in bank services in order to obtain card payments. This brought about costly prices for both retailers and consumers, reduced cross-border competition and the Single Market to be artificially segmented.
These findings made the Commission to conclude that the rules of MasterCard hindered retailers from accessing lower fees and put a limit to cross-border bank competition, thereby breaching the antitrust provisions of the EU. The violation was brought to an end when MasterCard altered its rules in light of the entry into force of the Interchange Fee Regulation. Accordingly, a fine was imposed on MasterCard by the Commission.