The European Commission has imposed a €570 million fine on Mastercard for “artificially increasing the costs of card payments to the detriment of EU consumers and traders”.
According to the bloc’s competition watchdog, Mastercard had hindered merchants access to cross-border card payment services”, thus violating the rules on abuse of a dominant position within the European Union.
According to the Commission, European consumers and businesses make more than half of their non-cash payments through cards and Mastercard is the second largest card scheme in the European Economic Area in terms of consumer card issuing and value of transactions. Banks offer card payment-related services under common brands that include Mastercard and Maestro, all of which are under Mastercard’s scheme, meaning the payment service giant acts as a platform through which issuing banks provide cardholders with payment cards that ensure the completion of a transaction and transfer funds to the retailer’s bank.
Mastercard’s rules force acquiring banks to apply the interchange fees of the country where the retailer was located, leaving the bank of the retailer that issues the debit or credit card to pay a fee called an ‘interchange fee’ to the cardholder’s bank. The banks then pass the fee to retailers who include it in the price, like any other cost, regardless of whether or not the consumers use payment cards.
In July 2015, Brussels had already filed a list of objections that roughly corresponded to a public indictment of Mastercard according to the EU’s competition law.
When a European regulation entered into force in December 2015 that introduced ceilings on interchange fees, the charges varied considerably from one European country to another. As a result, traders in countries with high interchange fees could not benefit from the lower charges offered by acquiring banks located in other EU countries.
The investigation of the European Commission concluded that due to “Mastercard’s rules on cross-border acquisitions, retailers were paying more for banking services to receive card payments than if they had been free to choose less expensive services…”This has resulted in higher prices for both retailers and consumers, reduced cross-border competition and artificially segmented the single market.”
A fine that was later imposed by Brussels on Mastercard was reduced by 10% compared to what should have paid because of the company’s will to cooperate and acknowledge the damage by changing its operational rules
Mastercard issued a curt response to the Commission’s latest fine, saying, “This decision relates to historic practices only and covers a limited period of time of fewer than two years and will not require any modification of Mastercard’s current business practices,” before adding, “Mastercard sees the closure of this anti-trust chapter as an important milestone for the company. Going forward, we will focus on what we do best: developing and delivering safe and seamless payment solutions that deliver real value to consumers, customers, retailers, and governments alike.”