The European Commission charged MasterCard for imposing excessive fees when cards issued outside of the European Union are used within its member states. As a result of MasterCard's rules, all consumers (even those who pay in cash) will have to bear the burden of higher costs for good and services as interchange fees continue to soar. Why? The answer is simple. According to the European watchdog, since the bank of the retailer pays an interchange fee to the cardholder’s bank the retailer must pay a percentage of the transaction to the customer's bank. For example, if a card from India is swiped at an Italian store, the shop owner may have to pay fees up to five times higher than the original cost.
The European watchdog said that it is concerned that MasterCard’s rules on cross-border transactions prevents cross-border trade due to high fees.
“Many consumers use payment cards every day, when they shop for food, clothes or purchase anything online,” said Margrethe Vestager, the European Union competition commissioner. “We 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.”
MasterCard’s case, opened in 2013, points out the mounting regulatory concerns around excessive fees that tourists incur when shopping within the 28-nation bloc, as well as anti-competitive practices that limits banks from offering services to traders, the Bloomberg article said.
MasterCard’s “honor all cards” rule, which ensures that a merchant accepts all types of cards from the company is also subjected to some scrutiny from the EU antitrust regulator.
In light of a slew of regulatory changes, the European Union mandated a law that would cap interchange fees on card payments and slash the costs on transactions by 6 billion euros, annually. In effect, MasterCard was accused for launching a “mad campaign,” which illegally circumvented the caps on card payments.