MasterCard launched a formal appeal at the European Court of First Instance, which deals with disputes between private companies and the EU institutions.
The American company considers its multilateral interchange fees (MIF) to be "fair" and complains about the regulatory approach chosen by the Commission. MasterCard fears that if the Commission's decision is followed by European national regulators it would be "a blow" to the whole European payment industry.
A multilateral interchange fee is an interbank payment made for each transaction carried out with a payment card. In the EU over 23 billion payments are made every year with payment cards, the overall value of which exceeds 1,350 billion euros.
A sector inquiry into retail banking conducted by the Commission between 2005 and 2006 found that in five European countries (Denmark, the Netherlands, Norway, Finland and Luxembourg) the payment card system worked well without MIFs.
Nevertheless, the Commission recognises that a complete and immediate elimination of the interchange fees would have negative effects on the market. Therefore, Brussels does not consider MIFs to be illegal as such, but holds that the system is compatible with EU competition rules "if it contributes to technical and economic progress and benefits consumers".
MasterCard, and previously Visa, must gradually reduce their fees, or risk heavy fines from Brussels. Last December the Commission threatened MasterCard with a daily fine of 3.5% of its daily global turnover in the preceding business year. The Visa system's exemption period expired at the end of 2007.
While appealing to the EU Court, MasterCard reaffirmed its intention to comply with the Commission's decision before the dispute is settled. The proceedings are open-ended and can sometimes go on for years.
The Commission is seeking to do away with anti-competitive behaviour in the payment card sector ahead of the full introduction of the Single Euro Payments Area (SEPA), which was officially launched at the beginning of 2008. By the end of 2010 all the payment cards in Europe have to be replaced by new SEPA-compliant cards (see our Links Dossier on SEPA).
