The EU Commissioner for the internal market and services, Michel Barnier, told French journalists in Brussels yesterday (18 July), that he “was very struck by an unusual campaign – an American campaign” he faced from MasterCard.
Barnier was referring to a proposed regulation his services will publish on Wednesday next week (24 July) which aims to cap multi-lateral interchange fees (MIFs) and reduce costs for consumers.
MIFs are charges paid by a retailer to a cardholder’s bank as part of an electronic payment card transaction, whether through a debit or a credit card.
The regulation, a copy of which was seen by EURACTIV, will set new capped levels for MIFs at 0.2% and 0.3% of the transaction value for debit card and credit cards respectively.
Barnier denounced a campaign by MasterCard in which the American company “bought full-page ads, which appeared as infomercials" in French media. This was, he said, "ambiguous as they put my picture on it”.
EURACTIV counts among the media benefiting from MasterCard advertising but did not run the advertorial campaign, which targeted French economic newspapers.
The French commissioner said he was “deeply moved” by the campaign because it related to proposals that had yet to be published and used pictures of him. “It is a lobbying campaign by MasterCard which must have cost a certain amount of money, by the way, and I found it quite unacceptable in principle.”
"We have the utmost respect for Commissioner Barnier and fully support the goal of encouraging electronic payments to stimulate economic growth while protecting European consumers. We take seriously the Commissioner's input and, as always, we remain committed to continuing to work productively and constructively with the DG Internal Market and Services,” a spokesman for MasterCard said.
Spanish evidence called into question
The intervention underlines stark differences between the positions of MasterCard and the EU Executive over the issue of MIFs – particularly on the benefits to consumers of cutting back on fees – which have heated up in recent months.
MasterCard claimed that lower interchange fees would lead to consumer cost rises, arguing it would drive consumers to use more cash. The company cited evidence from Spain where interchange fees were reduced by more than 57% between 2006 to 2010.
A report from Spain – carried out by academics and supported by MasterCard – concluded that consumers did not benefit from this reduction. Instead it said that retailers had saved almost €2.75 billion over the five-year period.
Asked by EURACTIV, the French commissioner dismissed reports that Spanish consumer groups had reservations about the benefits of capping interchange fees, suggesting MasterCard had supported such reports.
"MasterCard has spent a lot of money in this campaign and has done a lot of studies paid for by them. This is why I find it quite unacceptable as a method of lobbying. I have rarely seen this in the four years I've been here,” the Commissioner added.
The European Commission cited the example of France, where interchange fees were also lowered, without any resulting increase in card holder fees.
Consumer groups disagreed over the issue
Nevertheless the Commission itself accepted evidence from Spain suggesting that consumers are less likely than banks to enjoy the benefits of fee cuts.
“Experience (for example in Australia and Spain) shows that reducing fees for merchants encourages card acceptance by merchants and can lead to an increase in card transactions which leads to higher income for banks,” according to a memorandum circulated by the EU Executive in June 2013.
Another bone of contention concerned consumer support for the proposal.
Spanish consumer group ADICAE, one of Europe’s 10 largest, last month called on the Commission to refrain from further reductions on MIFs, citing the Spanish experience. Italian consumer group Movimento Difesa del Cittadino also opposed MIF reduction.
BEUC, the European consumer umbrella organisation, disagreed and dismissed the claims of these two groups as unrepresentative – since neither is a member of it.
Barnier underlined that consumer organisations such as BEUC and retailer association Eurocommerce fully backed his proposal to cap interchange fees saying they would benefit consumers and encourage transparency.
"Our approach on this issue has focused on ensuring that all who benefit from electronic payments – consumers, retailers, governments and issuers – understand how they work and the value they deliver," the Mastercard spokesman said.
He added that the company sought "to ensure the many consumer groups across Europe who share our point of view have their voices heard as the empirical evidence shows that the real loser when interchange fees are artificially reduced is the consumer, as demonstrated in Australia, the US and Spain."