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EU Clamps Down On MasterCard Over Fees

by Amanda Banks,, London

21 December 2007

The European Commission on Wednesday decided that MasterCard's multilateral interchange fees (MIF) for cross-border payment card transactions with MasterCard and Maestro branded debit and consumer credit cards in the European Economic Area (EEA) violate EC Treaty rules on restrictive business practices.

The Commission argued that MasterCard's MIF, a charge levied on each payment at a retail outlet when the payment is processed, inflated the cost of card acceptance by retailers without leading to proven efficiencies. MasterCard has six months to comply with the Commission's order to withdraw the fees.

If MasterCard fails to comply, the Commission has warned that it may impose daily penalty payments of 3.5% of its daily global turnover in the preceding business year.

MIF are not illegal as such. However, a MIF in an open payment card scheme such as MasterCard's is only compatible with EU competition rules if it contributes to technical and economic progress and benefits consumers, the EC explained. In the EU, over 23 billion payments, exceeding a value of EUR1350 billion, are made every year with payment cards.

MasterCard’s MIF applies to virtually all cross-border card payments in the EEA and to domestic card payments in Belgium, Ireland, Italy, the Czech Republic, Latvia, Luxemburg, Malta and Greece. Approximately 45% of all payment cards in the EEA either bear a MasterCard or a Maestro logo and MasterCard cards are accepted at some 85% of businesses accepting debit cards in the EEA.

Competition Commissioner Neelie Kroes announced that:

"Multilateral interchange fee agreements such as MasterCard's inflate the cost of card acceptance by retailers. Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices paid not only by card users but also by customers paying cash. The Commission will accept these fees only where they are clearly fostering innovation to the benefit of all users."

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