MasterCard Faces New Antitrust Trouble in EU

MasterCard, the world's second largest credit card network, continues to face allegations of anticompetitive behavior on both sides of the Atlantic.

In addition to navigating the still yet-to-be-fully-approved $7.2 billion class action lawsuit in the U.S., the European Commission announced today that it had opened an investigation into MasterCard's potentially anticompetitive use of transaction fees on merchants. This dovetails with the Commission's ongoing investigation into similarly anticompetitive practices by Visa, which began last July, and the efforts of the eight European Union countries where both card processing giants are either under investigation or facing court proceedings.

The Commission announced that it was focusing particularly on transaction fees levied by MasterCard on payments made by cardholders from countries outside the European Economic Area (EEA), as when a U.S. resident uses their MasterCard to pay for a purchase at a merchant in the EEA, rather than other fees for cross-border transactions within the EEA, which were outlawed in 2007. Furthermore, the Commission said it would be broadly investigating any of MasterCard's related business practices that amplify the risk of anticompetitive behavior, such as the "honor all cards" rule, which requires merchants to accept all or none of MasterCard's payment cards.

"These fees and practices may restrict competition. The inter-bank fees are generally passed on to the merchants, leading to higher overall fees for them," said the Commission. "Ultimately, such behavior is liable to slow down cross-border business and harm EU consumers."

The parallel investigations into Visa and MasterCard's business practices are driven by the Commission's stated goal to create a level playing field for all payment card providers. Ideally, increasing transparency in the way these fees are set and levied will result in rate cuts and lower processing costs for card-accepting merchants.

New regulations on payment card fees are expected to be proposed by the Commission before summer.

- Jacob Barron, CICP, NACM staff writer

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