European Union Launches Probe into MasterCard's Overcharging Practices

Strategic Insights -

The European Union's competition watchdog has initiated a formal investigation into MasterCard Inc, alleging that the US credit card giant has been overcharging customers in violation of European competition law. The European Commission has sent a statement of objections, citing MasterCard's rules that restrict banks from offering lower interchange fees to retailers based in other EU member states. This practice allegedly hampers competition between banks and restricts cross-border retail trade.

Key Takeaways:

  • The European Commission is investigating MasterCard's practices for allegedly artificially raising interchange fees, harming consumers and retailers in the EU.
  • The probe focuses on MasterCard's rules governing cross-border transactions within the EU and fees charged to retailers for receiving payments made with cards issued outside Europe.
  • MasterCard has an opportunity to respond to the commission's charges, with the case dating back to April 2013.
  • The investigation is the latest in a series of previous actions on interchange fees, with another US credit card giant, Visa Inc, also under investigation.
  • The European Commission is concerned that MasterCard and its licensees form a cartel, breaching EU antitrust rules, and may face a fine of up to 10% of its global annual revenue, which was $9.5 billion in 2014.
  • The commission also suspects MasterCard of artificially raising costs of card payments, which would harm consumers and retailers in the EU.
  • Margrethe Vestager, EC competition commissioner, is leading the investigation, which follows similar probes into Amazon, Google, and McDonald's.
  • The investigation may have implications for consumers and businesses, as they make over 40% of their non-cash payments through cards in the single European market.

Statistics:

  • The European Commission has launched a probe into MasterCard's overcharging practices.
  • The case has been ongoing since April 2013.
  • MasterCard's current global annual revenue is not specified, but it was $9.5 billion in 2014.
  • The commission is concerned that MasterCard and its licensees form a cartel, breaching EU antitrust rules.
  • The single European market has over 40% of its non-cash payments made through cards for both domestic and overseas purchases.

Sources:

  • European Commission
  • Margrethe Vestager, EC competition commissioner
  • MasterCard Inc
  • Domain-b.com (2010)
  • Contify.com (2010)