Brussels, 19/12/2007 (Agence Europe) - On 19 December, the European Commission decided that the multilateral interchange fees (MIFs) applied by MasterCard constitute a restrictive commercial practice, in violation of Article 81 of the EC Treaty. This decision comes further to a sectorial investigation carried out in 2005 and 2006 by the Commission on the field of retail banking. It noted that MIFs represent a risk to the creation of the Single Euro Payments Area (SEPA), whilst in five countries (Denmark, Netherlands, Norway, Finland and Luxembourg), payment cards function without MIFs. The Commission concluded that MasterCard's removal of its MIF would facilitate the SEPA by reducing costs for traders.
Neelie Kroes, Commissioner for Competition, explained it in these words: “the agreements (…) inflate the cost of card acceptance by retailers. Consumers foot the bill” for this. Feargal Quinn, Irish senator and president of the European retail traders' association, EuroCommerce, welcomed this decision, which will help to “bring down prices” for consumers and lead to a fairer approach for the 6 million shops which the association represents in Europe. MasterCard has announced its intention to come into line with the decision, even though it will challenge it before the Court of First Instance.
MIFs consist of a fee applied to cross-border transactions by payment card, carried out by means of consumer debit and credit cards. MasterCard MIFs vary between 0.4% of the value of the transaction (plus €0.05) and 1.05% (plus €0.05) for payments made by Maestro debit cards, and between 0.8% and 1.2% for transactions carried out using MasterCard credit cards. The fee is retained by the bank of the client (the “issuing bank”) and invoiced to the bank of the trader (the “acquiring bank”), which then takes this cost element on board in setting its price to merchants. MIFs are not illegal. However, when they are applied as part of an open payment card system such as the MasterCard system, they are not compatible with the competition rules of the EU unless they contribute to technical and economic progress and are of benefit to consumers. As a result of its examination, however, the Commission reached the conclusion that the MasterCard MIFs inflate costs for retailers without generating any proven increase in efficiency. MasterCard claimed that its MIFs are used to “maximise system output”, but was unable to provide any concrete evidence of this during the four-year investigation.
The MasterCard MIFs apply to almost all cross-border card payments made within the EEA and to national card payments made in Belgium, Ireland, Italy, the Czech Republic, Latvia, Luxembourg, Malta and Greece. Nearly 45% of all payment cards used within the European Economic Area (EEA) bear either the MasterCard or the Maestro logo, and MasterCard cards are accepted by nearly 85% of all retail traders which accept debit cards within the EEA. Although cross-border payments account for just 5% of MasterCard transactions (per number of transactions or the total value) in Europe, the company still feels hard done by in this decision, and plans to appeal to the Court of First Instance. In a press release, the president of MasterCard Europe, Javier Perez, states: “We are disappointed that (…) the Commission failed to appreciate that without a mechanism to fairly share costs among all the participants (…), consumers will be hurt”. He also refers to the example of Australia, where a forcible reduction in “interchange” fees is believed to have led to an increase in costs for the consumer, in particular higher annual costs.
In 2002, the Commission granted an exemption for a similar system proposed by Visa (see EUROPE 9646), after the company proposed to make substantial changes to its MIF. In particular, Visa proposed to scale down the level of its charges over time and to impose ceilings on certain charges, to be kept at the level of the costs of certain services, before the end of 2007. (C.D.)