How EU's MasterCard antitrust suit may affect you
The European Union鈥檚 antitrust officials filed charges against MasterCard Inc. on Thursday, accusing the US credit card company of violating the 28-nation bloc's laws with inflating payment fees.
Following a two-year investigation, the European Commission says MasterCard violated the EU鈥檚 antitrust rules through its interchange fees, or the charges banks make to cover costs in handling transactions. Such charges affect everyone 鈥� the retailer, credit card holders, and even people who pay in cash 鈥� have to pay. 聽When a customer uses a credit card in stores or online, the retailer banks pays the interchange fee to the cardholder鈥檚 bank. This fee gets passed on to the retailer, who raises the price of products and services to cover the costs. Thus, even if consumers pay in cash, they are affected by higher prices from retailers and service providers.
Such fees vary greatly from country to country, and i, the commission claims that MasterCard's rules prevent retailers in EU countries with high interchange fees from benefitting from lower fees offered by banks in "low interchange" countries.聽This violates European antitrust laws because the credit card companies鈥� rules prevent retailers benefiting from lower fees in other parts of the EU and restricts competition between banks cross-border.
Another alleged problem: MasterCard users with credit cards issued from other parts of the world pay higher fees when they make transactions in the EU, 聽because the company artificially raises high minimum price for processing purchases.
For example: when a Chinese tourist uses his card to pay a restaurant bill in Brussels, the restaurant鈥檚 bank had to pay fees up to five times higher than the fees the bank has to pay when a consumer uses a card that was issued in Europe, according to the commission.
The probes could lead to hefty fines of up to 10 percent of global annual revenue, or $950 million for MasterCard, , and require the companies to change their business practices.
鈥淲e currently suspect MasterCard is artificially raising the costs of card payments, which would harm consumers and retailers in the EU,鈥� Commissioner Margrethe Vestager, who is in charge of competition policy, said in a statement. 鈥淲e have concerns both in relation to the rules MasterCard applies to cross-border transactions within the EU, as well as the fees charged to retailers for receiving payments made with cards issued outside Europe.鈥�
MasterCard said the company will respond formally to the statement of objections and are cooperating the European Commission with the investigation, 聽Regulators and retailers have fighting these relatively-unknown fees for years. EuroCommerce, a commerce federation, filed a complaint in 1997 that triggered the first EU investigation into MasterCard.聽Since then, the EU has launched multiple investigations into credit card companies overcharging retailers and banks for various fees. EU started its probe into MasterCard in April 2013 and has over similar violations of the bloc鈥檚 antitrust laws.
In April, the European Parliament , arguing that it would reduce costs for both retailers and consumers and lead to an EU-wide payments market. Interchange fees for all credit card transactions would be capped at 0.3 percent. The changes will go into effect later this year.
