MasterCard is provisionally repealing the cross-border interchange fees it charges on all transactions made in Europe with credit or debit cards in a bid to comply with a Commission deadline of 21 June. But it will continue to look for a fee scheme that complies with EU rules.
Competition Commissioner Neelie Kroes said: “Irrespective of MasterCard’s move to temporarily repeal its cross-border MIF (multilateral interchange fees), the Commission will continue to be open to assess any new proposals from MasterCard concerning systems to ensure both efficient payments and a fair share of the benefits for consumers and retailers.”
The Commission ruled, on 19 December 2007, that the American company’s multilateral interchange fees for cross-border payment card transactions violate EU rules on restrictive business practices (EURACTIV 20/12/07). Interchange fees are those paid by the merchant’s bank to the cardholder’s bank at any point-of-sale transaction using a credit card, such as MasterCard or Visa.
The European competition authority argued that these fees “inflated the cost of card acceptance by retailers without leading to proven efficiencies” and acted “like a tax on consumption”.
Therefore the Commission gave MasterCard six months (until 21 June 2008) to come into line with EU antitrust rules. So far, MasterCard has not done that, which is why it has decided to temporarily cancel its MIFs to avoid a Commission fine.
In March this year, the company formally challenged the EU executive’s ruling in the European Court of First Instance, which deals with disputes between private companies and EU institutions (EURACTIV 04/03/08). Despite provisionally cancelling its interchange fees, MasterCard will continue its appeal.
“MasterCard’s policy is to comply with all applicable decisions and regulations, but to challenge them through appropriate channels when we believe that is necessary,” said MasterCard Europe President Javier Perez.
Perez confirmed that MasterCard will continue to look for a MIF that complies with EU exemption criteria, despite having already offered several alternatives – all of which were rejected by the Commission. “The level of these fees in the future will depend on the result of our continuing dialogue with the Commission and, ultimately, upon the outcome of MasterCard’s appeal,” he said.
In the EU over 23 billion payments are made every year with payment cards, the overall value of which exceeds €1,350 billion.
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.
The EU executive is seeking to do away with anti-competitive behaviour in the payment card sector ahead of the full introduction of the Single European 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).