EU court upholds EC ruling against MasterCard on interchange fees

2012-05-25

An European Union court Thursday dismissed MasterCard's challenge against a European Commission ruling that the global payments and technology company's cross-border interchange fees violated competition law.

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General Court in Luxembourg, the second highest in 27-nation EU, has maintained that it "does not accept the arguments relating to the objective necessity of the multilateral interchange fees (MIF) to the operation of the MasterCard payment system".

In its ruling, the court said, "The methods of setting the MIF tended to overestimate the costs borne by the financial institutions on issuing payment cards and, moreover, inadequately to assess the advantages which merchants derive from that form of payment."

The plastic money major has set its cross-border interchange fees at 20 bps for debit transactions and at 30 bps for credit transactions.

In December 2007, the EC ruled that multilateral interchange fees (MIF) charged for cross-border transactions made with MasterCard and Maestro debit and credit cards "violate EC Treaty rules on restrictive business practices".

Under the EC ruling MasterCard was required to scrap the cross border transaction fees within six months or face massive fines of 3.5% of its daily consolidate turnover.

While complying with the EC decision by reaching an interim agreement with the it, in March 2008 MasterCard together with several of the continent's biggest banks, including RBS, HSBC and Lloyds TSB, challenged the Commission's decision before the EU's General Court in Luxembourg.

In its appeal, MasterCard argued that MIFs were vital for the viability of its programme.

Announcing its disagreement with the Luxembourg General Court's judgment, MasterCard said it intends to go in for further appeal.

Javier Perez, President, MasterCard Europe said: "MasterCard balances the interests of both consumers and retailers, so that each party pays its fair share of the costs for the benefits it receives."

"Today's ruling, if it stands, would upset that sharing and tip the balance decidedly against consumers. It would also threaten the continued delivery of the most advanced electronic payment technologies in Europe which, in turn, are essential to facilitating business and driving economic growth," Perez added.

Source: Europe News.Net