MasterCard Charged For Allegedly Overcharging Consumers

The European Commission issued a Statement of Objections yesterday (July 9) claiming that MasterCard charged excessive fees when cards issued outside of the EU are used within its borders.

The antitrust regulator launched the new case after a two-year investigation into MasterCard, which began as an effort to reduce such fees and increase cross-border trade.

Commissioner Margrethe Vestager, who is in charge of competition policy, said in the commission’s release: “Many consumers use payment cards every day, when they shop for food, clothes or purchase anything online. We currently suspect MasterCard is artificially raising the costs of card payments, which would harm consumers and retailers in the EU. 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 now has an opportunity to respond to our charges.”

MasterCard is accused of overcharging on interchange fees, which the bank of a retailer pays to the cardholder’s bank every time a consumer uses a payment card in a shop or online. These fees are essentially passed on to all consumers, even those who do not use cards, because retailers usually account for these higher fees in the final prices charged for products or services.

According to the European Commission, MasterCard charging higher interchange fees when consumers used payment cards within the EU that were not issued there prevents retailers from benefitting from lower fees elsewhere and prohibits competition between banks cross-border. The Commission said these actions were in breach of European antitrust rules and lead to higher prices prices for both retailers and consumers alike.

The latest round of objections follows a 2007 investigation into MasterCard’s interchange fees on cross-border transactions, which restricted competition between banks, the Court of Justice later ruled. In 2009, MasterCard complied by capping member banks’ cross-border interchange fees for credit cards and debit cards, but it did not reduce other interchange fees, the Commission said.

The Commission said the sending of a Statement of Objections does not prejudge the outcome of the investigation into MasterCard.

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