Following a long investigation, the European Commission decided on 19 December 2007 that the multi-lateral interchange fee (MIF) operated on cross-border transactions with Mastercard and Maestro branded cards in the EEA infringes EU competition law (prohibition on restrictive agreements). The European Commission requires Mastercard to withdraw the MIF within six months or face daily penalties of 3.5% of daily global turnover.
MasterCard's MIF is a charge on each payment at a merchant outlet. The European Commission has found that this charge ranges between 0.4% of the transaction value plus €0.05 and 1.05% plus €0.05 for payments with Maestro debit cards, and between 0.80% and 1.20% for transactions with MasterCard consumer credit cards. The fee is retained by the customer's bank (the "issuing bank") and charged to the merchant's bank (the "acquiring bank"), which then takes this cost element on board in setting its prices to merchants.
The European Commission prohibited MasterCard's MIF because it inflates the base on which acquiring banks charge prices to merchants for accepting payment cards, as the MIF accounts for a large part of the final price businesses pay for accepting MasterCard's payment cards. It believes this restricts price competition and harms businesses and their customers. The European Commission was unmoved by Mastercard’s assertions that the MIF acts to "maximise system output" and did not find any objective efficiencies in Mastercard’s MIF that could balance the negative effects on price competition between its member banks.
Mastercard has indicated that it intends to appeal the European Commission’s decision regarding its MIF.
The European Commission has already reviewed the Visa system’s similar MIF. Following Visa’s offer to cut and cap its MIF and to make its system more transparent to retailers, the European Commission granted it an EU competition law exemption. However, this exemption expires on 31 December 2007. This together with the Mastercard decision mean that 2008 could be a brave new world for cross-border MIFs within the EEA.
