More incentives for retailers to lower their prices have been secured by the European Commission. Following the adoption in 2015 of the Interchange Fee Regulation, which capped interchange fees for cards issued and used in Europe, the European Commission has once again used its powers as the EU’s competition watchdog to intervene in this field.
When a consumer uses a debit or a credit card in a shop or online, the bank of the retailer, termed as the “acquiring bank”, pays a fee called “multilateral interchange fee” (“MIF”) to the cardholder’s bank, termed as the “issuing bank”. The acquiring bank passes on this fee to the retailer who absorbs it, like any other cost, in the final prices of the products offered to consumers. It is the Mastercard and Visa networks which set the level of these MIFs applied by their licensee banks between them and retailers and consumers have no means of influencing the level of MIFs charged.
The amount of MIF which can be charged for intra-EEA card payments was capped by the EU’s Interchange Fee Regulation.
However, the caps of this Regulation do not apply to interregional transactions, as cards issued outside the EEA fall outside its scope. Interregional MIFs are fees applied to payments made in the EEA with consumer debit and credit cards issued outside the EEA, such as, when a US tourist uses a Mastercard or Visa card issued in the US to pay a restaurant bill in France. In the course of anti-trust proceedings opened against both Mastercard and Visa, the Commission outlined its competition concerns in the statements of objection addressed to both companies. Its main concern related to the fact that interregional MIFs may anti-competitively increase prices for European retailers accepting payments from cards issued outside the EEA and in turn lead to higher prices for consumers in the EEA. Both Mastercard and Visa have now committed to reduce, on an average by 40 per cent, their respective interregional MIFs for payments made in the EEA with Mastercard, Maestro, Visa, Visa Electron and V-Pay credit and debit cards issued outside the EEA.
The Commission is satisfied with the commitments offered by Mastercard and Visa
They have also committed to refrain from circumventing these caps by any other measure as well as to publish all interregional interchange fees covered by the commitments in a clearly visible manner on their respective websites. These commitments will apply for five years and six months and are expected to lead to lower prices for the benefit of all European consumers.
The Commission is satisfied that the commitments offered by Mastercard and Visa address its concerns and that the cost for retailers of accepting interregional consumer card payments does not exceed the cost of accepting alternative means of payments. The commitments have therefore been made legally binding for both Mastercard and Visa in terms of EU antitrust rules.
As the enforcer of EU competition rules and policy, the European Commission seems to be adamant in ensuring that it will use its powers in reaching the ultimate objective of competition law, that of having in place a free and dynamic internal market which promotes general economic welfare for consumers and industry alike.
Mariosa Vella Cardona M’Jur, LL.D., is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law. She is also a visiting examiner at the University of Malta.
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