The European Commission on 22 January 2019 fined Mastercard 570.6 million euros (U.S. $648 million) for anticompetitive behavior, in breach of EU antitrust rules.

When a consumer uses a debit or credit card, the retailer’s bank pays an “interchange fee” to the cardholder’s bank. The retailer’s bank then passes this fee on to the retailer who includes it in the final prices for all consumers, even those who do not use cards.

At issue here was Mastercard’s requirement that retailers’ banks apply the interchange fees from the country where the retailer was located. In April 2013, the Commission opened a formal antitrust investigation into Mastercard to assess whether these “cross-border acquiring” rules breached EU antitrust rules.

Ultimately, the Commission investigation concluded that Mastercard’s rules infringed Article 101 of the Treaty on the Functioning of the European Union (TFEU), which prohibits agreements between companies or decisions by an association of undertakings that prevent, restrict, or distort competition within the EU’s Single Market.

“By preventing merchants from shopping around for better conditions offered by banks in other member states, Mastercard’s rules artificially raised the costs of card payments, harming consumers and retailers in the EU,” said Commissioner Margrethe Vestager, in charge of competition policy. As a result, the Commission imposed a fine on Mastercard. The European Commission said that Mastercard cooperated “by acknowledging the facts and the infringements of EU competition rules” and granted Mastercard a 10-percent fine reduction in return for this cooperation.

Mastercard’s practices ended when the Interchange Fee Regulation entered into force on 9 December 2015, which capped interchange fees in the European Economic Area (EEA) to a maximum of 0.2 percent of the transaction’s value for debit cards and 0.3 percent of the transaction’s value for credit cards. Before that, these fees varied considerably from one country to another in the EEA. Since the entry into force of the regulation, retailers pay a reduced domestic or cross-border interchange fee, which brings retailers’ costs down considerably.

Ongoing investigation

In the Statement of Objections addressed to Mastercard in 2015, the Commission outlined its preliminary view that Mastercard’s interchange fees applied to payments made in EEA with consumer debit and credit cards issued outside the EEA (also referred to as inter-regional MIFs) may breach EU antitrust rules.

The Commission said it’s “concerned that such fees applied by Mastercard may anti-competitively increase prices for European retailers accepting payments from cards issued outside the EEA and in turn lead to higher prices for consumer goods and services in the EEA”; That part of the case is still pending.

The Commission outlined its competition concerns related to inter-regional MIFs in a Statement of Objections addressed to Mastercard on 9 July 2015 and a Supplementary Statement of Objections addressed to Visa on 3 August 2017.

In December 2018, the Commission invited comments from interested parties on commitments offered separately by Visa and Mastercard to address the Commission’s competition concerns relating to inter-regional interchange fees for card payment transactions.