The European Commission announced Monday (April 29) that commitments made by Mastercard and Visa to reduce interchange fees are legally binding under European Union antitrust rules.
According to a press release, the European Commission said the commitments will “significantly” reduce their multilateral interchange fees for payments in the European Economic Area (EEA) with cards issued to consumers elsewhere. The European Commission said the reductions on average will be around 40 percent.
“Mastercard and Visa have committed to significantly reduce the interchange fees applied to payments made in Europe with cards issued elsewhere. The commitments, which are now binding on Visa and Mastercard, will reduce the costs borne by retailers for accepting payments with cards issued outside the EEA,” said Commissioner Margrethe Vestager, in charge of competition policy in a press release. “This, together with our January 2019 decision on Mastercard’s cross-border card payment services, will lead to lower prices for European retailers to do business, ultimately to the benefit of all consumers.”
In the press release, the European Commission said Mastercard and Visa have committed to lower their multilateral interchange fees (MIFs) which will greatly reduce costs for retailers in the EEA when accepting payments with a card issued outside of the EEA. Retailers typically pass the fees on to consumers in the form of higher prices. Mastercard and Visa set the level of MIFs. Retailers and consumers had little means to influence the level of the fee. Both Mastercard and Visa have now committed to reduce their respective inter-regional MIFs.
Under the agreement, both payment companies will reduce the current level of inter-regional interchange fees to or below predefined binding caps within six months. They also agree to refrain from circumventing the caps and publish all inter-regional interchange fees covered by the commitments in a clearly visible manner on their websites.
The European Commission said the commitments will apply for five years and six months. A trustee will be appointed by the Commission to monitor the implementation of the commitments. These commitments will significantly reduce the costs for retailers in the EEA when they accept payments made with cards issued outside the EEA, the European Commission said in the release. The move is expected to result in lower prices, which benefits all European consumers.