EU Court advised to rule against payment cards fees


A top legal official in the European Court of Justice yesterday (30 January) advised the EU judges to reject an appeal made by MasterCard over the fees it charges on payment transactions.

The fees, best known by their acronym MIFs (multilateral interchange fees), have been the object of a legal dispute between the EU authorities and the major payment cards companies (MasterCard and Visa).

Yesterday's opinion given by the advocate general of the ECJ, Paolo Mengozzi, is the latest episode of a saga that has run since 2007 and is expected to end by autumn at the latest. The Court is to issue its definitive decision between April and September 2014.

Not big surprises are expected. Over the years, the EU institutions have shown a common front against MIFs, accused of being a hidden "tax on consumption" by Neelie Kroes, the EU antitrust commissioner who started the fight more than six years ago, before passing the baton to the current competition commissioner, Joaquin Almunia.

MasterCard has hit back at the Commission, but its legal recourse was rejected by the EU tribunal in 2012. The payment card group has issued a second appeal against the tribunal.

Yesterday, the advocate general confirmed the validity of the first ruling stating that "the tribunal sufficiently analysed the effects of MIFs on competition, and has correctly explained why MIFs distort competition".

The advocate general's opinion is not binding, but in most cases the ECJ's decisions are close to the advocate general's position.

“The consumer will be the big loser if this opinion is followed by the Court," Javier Perez, president of MasterCard Europe, said in a statement.

The way forward

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

The proposal would provide a definitive legal cover for commitments already made and partially applied by MasterCard and Visa.

Visa Europe is already capping at 0.2% the MIFs on debit card transactions, and has offered to lower credit card MIFs to 0.3%, the same benchmark applied by MasterCard.

Nevertheless, payment card companies are still battling the EU move and hope to avoid the definitive caps.

“A one-size-fits all approach to interchange across Europe will drive the cost of cards up for consumers," said Perez. "Any future legislation capping interchange fees will have a significant impact on the future of electronic payments in Europe,” he added in a statement.

MasterCard argues that the costs for transaction have shifted from retailers to consumers in Spain, Australia and the United States, where caps to MIFs have already been applied.

Retail organisations respond that these charges are already factored into final prices paid by consumers when shopping.

The European Parliament and representatives of EU states are about to reach the crucial phase of their debate on the proposed legislation. A first vote in the Parliament is expected by the end of February.  

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

In the EU, over 23 billion payments are made every year with payment cards, the overall value of which exceeds €1,350 billion. According to figures provided by the European retailers' association (EuroCommerce), MIFs amount to €12 billion per year.

In a long legal battle waged against what are seen as unfair practises of payment cards groups, the European Commission fined Visa (which is currently under a new investigation) and banned MasterCard from using MIFs. In May 2012, the EU Tribunal upheld the EU executive move against MasterCard.

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