EU wins landmark ruling over credit, payment card fees


Mastercard lost a challenge to an EU ban on its cross-border card fees in a ruling that puts rival Visa Europe squarely in the sights of the European regulators over its charges.

Europe's second-highest court rejected on Thursday (24 May) arguments by the world's second-largest credit and debit card network, upholding the European Commission's 2007 decision which was triggered by a complaint by retailers.

The EU competition watchdog said at the time that the network's cross-border multilateral interchange fee (MIF) levied on retailers' credit and debit card transactions, breached EU antitrust rules and had to be changed.

The EU ban is part of the EU executive's strategy to break down barriers to e-commerce and cut costs for businesses in the 27-member European Union.

"The General Court confirms the Commission's decision prohibiting the multilateral interchange fees applied by Mastercard," judges at the Luxembourg-based court said in the ruling, published on Thursday (24 May).

"The methods of setting the MIF tended to overestimate the costs borne by the financial institutions on issuing payment cards and, moreover, inadequately to assess the advantages which merchants derive from that form of payment."

MasterCard President Javier Perez said the company would appeal but would also continue to levy fees agreed with the Commission in a 2009 settlement, pending discussions with the regulator on the next step.

"We will apply 20/30, which is the level we have today, until further notice," Perez said, referring to the 0.2 percent charge for debit cards and 0.30 percent for credit cards as part of the settlement. MasterCard had said at the time of the settlement that the fees, halved from their previous level, were temporary, pending the court ruling.

Appeals to the EU Court of Justice are limited to points of law.

Visa Europe next?

EU Competition Commissioner Joaquin Almunia welcomed the ruling and called on Visa Europe, the European licensee of Visa Inc. and Europe's largest card network, to fall into line.

"The Commission invites Visa and MasterCard to consider carefully how to bring the multilateral interchange fees in the EU in line with competition," Almunia said in a statement.

Almunia said in January that he was readying formal charges against Visa Europe, but had not decided when to notify the company. The Commission is now investigating Visa Europe's credit card fees.

Visa Europe, which cut its debit card charges in December 2010 to settle the Commission's investigation into that part of its business, said on Thursday it wanted a business-friendly method of setting fees.

"Visa Europe… has consistently said that it would like to reach a commercially acceptable agreement on an appropriate methodology for setting credit and deferred debit interchange in the interests of all stakeholders in the payments industry," spokeswoman Amanda Kamin said in a statement.

Cross-border credit and debit card fees account for 3 to 5% of the value of all card transactions in western Europe, according to MasterCard.

MasterCard made $682 million (€543 million) in net income in the first quarter, up 21%, thanks to higher consumer spending with cards.

The case is T-111/08, MasterCard and others v. European Commission.

EU retail lobby EuroCommerce welcomed the court decision in the MasterCard case. "This is an excellent result for retailers in Europe, for businesses and consumers," EuroCommerce Director-General Christian Verschueren said.

The European Consumer Organisation BEUC also applauded the verdict. "Regulators across the globe are starting to listen to the fact that card schemes function perfectly well without these so-called 'interchange' fees," Monique Goyens, director general of the body, said in a statement.

Under pressure from the European Commission, MasterCard decided in 2009 to bring its cross-border multilateral interchange fees (MIF) on credit card transactions down to 0.3% from a previous range of 0.8% to 1.9%.

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.

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