ECJ confirms prohibition on multilateral interchange fees applied by MasterCard
On 19 December 2007 The European Commission (“Commission”) published a decision regarding multilateral interchange fees (“MIF”) within the card payment system MasterCard for private clients. Only MasterCard’s MIF for cross-border transactions within the European Economic Area (“EEA”) and within Belgium, Ireland, Italy, Latvia, Luxemburg, Malta, Greece and the Czech Republic were subject to this decision, in which the fees were considered as anti-competitive and therefore prohibited. However, no fine was imposed on MasterCard for the application of the MIF.
Multiple parties are involved in a card payment system: The owner of the payment system (in this case MasterCard), the actual cardholder, the banking institution that issues credit/debit cards (“issuing bank”), a retailer and a bank, which enables the retailer to accept payments by card and collects a fee for that service (“acquiring bank”).
- Multilateral Interchange Fee („MIF“)
The so-called MIF are fees to be paid by the acquiring bank to the issuing bank for every transaction charged. The amount of those fees was set by MasterCard. Until the original decision of the Commission, the fees were between 0.4% - 1.05% of the transaction value in addition to a fee of EUR 0.05 for payments done with Maestro debit cards and between 0.8% to 1.2% of the transaction value for payments done with MasterCard credit cards. These were limited respectively to 0.2% and 0.3% in 2009.
The Commission found in its original decision that these fees have a similar effect as minimum prices in regards to the relationship between an acquiring bank and its customer. It defined three different markets in that context: (i) a market for payment systems as such (i.e. MasterCard and Visa), (ii) a market for the issuance of cards (“issuing market”), and (iii) a market for enabling card-payments by private customers at shops (“acquiring market").
- Decision of the European Commission
The Commission stated in its decision that MIF would mainly affect the acquisition market for having the same effect as minimum prices. The fees set by MasterCard made acquiring banks less flexible regarding offers for retailers who want to implement a card-payment system in their shops since the lowest fare possible would have been corresponding to the MIF.
Hence, the MIF would also artificially increase the fees retailers submit their bank for offering the card-payment system. In most cases those costs would be passed on to customers.
- Judgment of the Court
The Court followed the opinion of the Commission on 24 May 2012 in its case T-111/08, MasterCard Inc. v Commission. Furthermore, the Court pointed out that the implementation of the MIF was not objectively necessary for the functioning of the payment system and thus, due to their anti-competitive effects, could not be justified. Moreover, it also confirmed the hypothetical analysis of the Commission in which it recommends a ban on introducing post-payment fees in order to counter the effects of the abolition of MIF. The ban prohibits issuing and acquiring banks to set interchange fees after a transaction was already done.
- Judgment of the ECJ
The European Court of Justice (“ECJ”) reaffirmed the Commissions and Courts decisions on 11 September 2014 in its case C-382/12P, MasterCard Inc. v Commission. The ECJ also stated that the Court should have considered other scenarios without regulatory intervention than just the Commissions’ hypothesis of implementing the ex-post ban and thus had committed an error of law. However, that error of law had no impact on the final judgment and the Court could rely on the Commission’s hypothesis. Nevertheless, the Court did proof thoroughly that the MIF had a negative effect for negotiations between acquiring banks and retailers regarding merchant fees.
Dr. Christina Hummer