MasterCard interchange fees – EU and UK competition developments 2

The European Commission announced on 30 June 2006 that it has sent a supplementary Statement of Objections (SO) to MasterCard in relation to its cross-border interchange fees (fees paid by merchant banks to card issuing banks for over the counter payments with a MasterCard or Maestro branded payment card).

The supplementary SO sets out the Commission’s preliminary view that the interchange fees may infringe EU competition law as they pre-determine a minimum price retailers must pay for accepting MasterCard and Maestro branded payment cards. This supplements a previous SO issued by the European Commission in autumn 2003, which raised concerns about the interchange fee possibly being set above costs and lack of transparency in the fee structure to retailers.

We will have to wait and see what the European Commission’s final view on interchange fees is. It will be interesting to see whether the European Commission is influenced at all by the UK’s competition investigations into MasterCard’s domestic (UK) interchange fee.

The Office of Fair Trading recently (20 June 2006) withdrew an earlier decision finding that the MasterCard interchange fee in place between 1 March 2000 and 18 November 2004 infringed EU and UK competition law. The OFT withdrew the decision, which MasterCard had challenged in the Competition Appeal Tribunal, due to “serious procedural problems”. However, the OFT has confirmed that it is continuing to investigate MasterCard’s (and Visa’s) current interchange arrangements.

The European Commission is also currently undertaking a sector investigation into financial services, which specifically includes payment cards and payment services. While the European Commission was at great pains to point out that the 30 June supplementary SO does not stem from its sector inquiry, it seems clear that the Commission has significantly increased its understanding of and focus on the payment cards sector.

For details of the supplementary SO, please click here. For details of the OFT’s setting aside of its MasterCard decision, please click here.