ECJ ruling exposes MasterCard to national antitrust probes

MasterCard interchange fees were anti-competitive, ECJ judges ruled today. [Håkan Dahlström/Flickr]

MasterCard broke EU antitrust law when setting interchange charges for cross-border card payments, the highest court of the European Union today ruled (11 September).

The judgment will influence other national competition law proceedings in the EU, which were paused pending the European Court of Justice (ECJ) decision in Luxembourg. The court rules on points of EU law, giving clarification to other courts.

The European Commission said several court appeals in France, Italy and Hungary were stayed, and an investigation by the UK’s National Competition Authority was also put on hold. There are other ongoing probes in Germany, Cyprus and Hungary.

The judgment will indirectly also have a bearing on actions for damages launched against MasterCard in the UK, the Commission said.

MasterCard will not be fined by the EU as a result of today’s judgment, because the company notified the Commission of its practices in 1992. Under EU competition law at that time, businesses notifying the executive could not be fined for any trespass.

Regulation in the works

The ECJ ruling could also influence the ongoing legislative process to regulate multi-interchange fees (MIFs) at EU level.

A bill proposed by the Commission in 2013 capped cross-border MIFs at 0.2% of the transaction value for debit card payments, and at 0.3% for credit card payments. Caps on domestic fees are brought into force after a transition period.

In April, the old European Parliament passed amendments to the revised Payment Services Directive legislation, a package including the interchange fee regulation. 

It is now up to the new Parliament, the Italian Presidency of the EU, and the Council of Ministers, to finalise it. Their negotiations will likely be influenced by the judges’ ruling.

The law was drafted in response to the General Court’s judgment against MasterCard in 2012, which was appealed, leading to today’s ruling. The bill is expected to be adopted by 2015 with caps entering into force in 2016. On Tuesday, MasterCard won a case against the Commission, which is expected to give it access to research documents that fed into the draft rules.

The European card industry has complied with the cross-border cap since a Commission decision in 2007 that MasterCard and others had broken antitrust rules.  

The decision was appealed leading to the 2012 General Court judgment, which was today confirmed as correct by ECJ judges.

Commission competition spokesman Antoine Columbani told reporters, “Today’s judgment is a big win for EU consumers who for too long have been paying unjustifiably high hidden fees for payments with credit and debit cards

“It’s the end of a debate that has lasted for two decades and is relevant not only to cross-border fees but all fees, including domestic fees, that are set in a similar way.”

Javier Perez, president of MasterCard Europe, said the ruling was disappointing.

“When MasterCard brought this action in 2007 we did so because we believed then, as we do now, that market-based solutions are the best way to ensure a fair and competitive payments landscape in Europe – one that makes consumers’ lives easier, and brings increased business for merchants,” he said.

The judgment

Judges rejected MasterCard’s appeal against a European Commission 2007 decision that the company, at the time an association of banks, had colluded in fixing the price and had restricted competition.

The Commission decision was backed by the EU’s General Court in 2012 but MasterCard had appealed that judgment on two points of EU law. It denied it restricted competition in practice and that it fixed the fees after 2006, when it became a publicly listed company rather than an association of banks. 

The judges decided MasterCard is still “an association of undertakings”, despite its 2006 initial public offering, when banks sold their stake in the company on the New York Stock Exchange.

MasterCard operates a four party card system. The acquirer (the merchants’ bank) pays an issuer (cardholders’ bank) an interchange fee, and the merchant pays the acquirer a service fee.

That service fee is where distortions in competition would take place, and is an area the issuer has little influence, argued MasterCard but the judges did not agree.

The Commission argued that the service fee is determined by the interchange fee, and that merchants pass on their costs for accepting card payments to their customers by raising retail prices.


Javier Perez, president of MasterCard Europe, said, “Today’s negative ruling by the European Court of Justice in relation to cross border interchange fees is disappointing. When MasterCard brought this action in 2007 we did so because we believed then, as we do now, that market-based solutions are the best way to ensure a fair and competitive payments landscape in Europe – one that makes consumers’ lives easier, and brings increased business for merchants.

“Today’s negative judgment will have little or no impact on how MasterCard operates; we will continue to comply with the decision as we have been doing for a number of years.  This means we would maintain our European (intra-EAA) cross-border consumer interchange fees at a weighted average of 0.2% for debit and 0.3% for credit. Together with our partners, we are committed to constructive cooperation and dialogue with EU decision-makers to ensure that any future payments legislation allows us to provide the most innovative and affordable payment solutions to our customers, cardholders and retailers, and does not have the unintended consequence of shifting costs on to consumers.” 

Peter Wright, head of EMEA card services at American Express said, "Today's  rejection by the European Court of MasterCard's appeal  shows again that the  real problem in the  European  payments  sector  lies  in  the  dominance  and  collective  price-setting  practices  of  the  two large inter-bank networks.

"It  also  underscores  the  need  for  the  draft  EU  legislation  currently  being  debated  –  the  so-called  'payments package,' which includes  caps on interchange fees – to focus squarely on addressing the  very  real  issues  posed  by the  practices  of these  dominant  schemes,  rather than  penalising  smaller players that  have  not  raised  competition concerns  and  do  not  operate  on the  basis  of  collective  price-setting  practices.  

"Legislation  should  only  target  those  companies  that  have  fallen  foul  of  Europe's competition  laws,  rather  than  be  applied  indiscriminately  to  an  entire  sector. By including  smaller networks  such  as  American  Express,  EU  legislators  are  attempting  to  solve  one  problem  by  creating another." 

Commission competition spokesman Antoine Columbani said, "The judgment confirms that MasterCard's inter-bank fees for cross-border payment transactions in the European Economic Area restrict competition in the internal market, in breach of EU competition rules.

"The Commission considers that MasterCard should now comply quickly and proactively with EU competition rules and bring all its inter-bank fees in the European Economic Area in lines with the competition rules. The same applies to other European card schemes and the banks involved in those schemes."

A multilateral interchange fee (MIF) is an interbank payment made for each transaction carried out with a consumer card.

In a long legal battle waged against what are seen as unfair practices of payment cards groups, the European Commission fined Visa (which is currently under a new investigation) and took on MasterCard for its MIFs. In May 2012, EU judges upheld the executive's move against MasterCard.

In an attempt to turn the tribunal's decision into law, the European Commission proposed in July 2013 new legislation capping MIFs at 0.2% of the transaction value for debit card payments, and at 0.3% for credit cards.

  • 2015/2016: Estimated date when revised Payment Services Directive comes into force.

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