Out-Law News 1 min. read
10 Apr 2013, 4:27 pm
The European Commission said it had opened an investigation into MasterCard practices associated with the 'interbank fees' applied to the processing of MasterCard card payments in the EU by cardholders from outside Europe. The Commission said the arrangements may be anti-competitive.
Inter-bank fees, or multilateral inter-change fees (MIFs) as they are also known, are set by card providers and refer to the charges imposed for the processing of credit and debit card payments. Whilst banks known as acquiring banks charge retailers a merchant service charge to collect card payments, those banks themselves must pay MIFs to other banks – issuing banks – that issue the relevant payment card to the retailer’s customer. This is a cost built into the merchant service charge.
The Commission previously deemed that the inter-bank fees set by MasterCard for cross-border credit card transactions within the European Economic Area to be anti-competitive, although that 2007 decision is the subject of an appeal by MasterCard to the Court of Justice of the EU. Now the regulator has decided to probe whether the charges levied on non-EEA cardholders when they make MasterCard card purchases within the EEA are in line with EU competition rules.
It also said that it was concerned about MasterCard's rules on 'cross-border acquiring', which it said "limit the possibility for a merchant to benefit from better conditions offered by banks established elsewhere in the internal market".
In addition, it said that other "business rules and practices" that MasterCard engage in, including requiring retailers to accept all types of MasterCard cards, including premium cards that carry higher interchange fee rates – the so-called 'Honour All Cards' rule, "amplify the Commission's competition concerns".
"These fees and practices may restrict competition," the Commission said in a statement. "The inter-bank fees are generally passed on to the merchants, leading to higher overall fees for them. Ultimately, such behaviour is liable to slow down cross-border business and harm EU consumers."
EU competition law prohibits companies from entering into anti-competitive agreements with other businesses.
The European Commission is currently involved in a parallel investigation into the inter-bank fees arrangements formed by Visa. It said it will propose new legislation in relation to inter-bank fees before the summer in a bid to "provide legal certainty and a level playing field for all [card] providers".
