When a card holder undertakes a transaction, the bank that issued the card imposes a fee on the acquiring bank that processes the payment and transfers the money to the retailer. The acquiring bank then charges a fee to the retailer called a merchant service charge. This charge is generally passed on to consumers through higher retail prices. These fees are collectively known as interchange fees.
The European Commission said on Tuesday that the rules Mastercard applied on interchange fees prevented retailers from accessing the lowest interchange fees available from banks for processing payments, and that this in turn led retailers to increase their prices and ultimately impacted the cost of goods and services for consumers.
The infringement by Mastercard occurred prior to new EU legislation on interchange fees taking effect in 2015, the Commission said.
"Mastercard's rules obliged acquiring banks to apply the interchange fees of the country where the retailer was located," the Commission said. "Prior to 9 December 2015, when the Interchange Fee Regulation introduced caps on the level of the fees, interchange fees varied considerably from one country to another in the EEA. As a result, retailers in high-interchange fee countries could not benefit from lower interchange fees offered by an acquiring bank located in another member state."
"The Commission investigation found that because of Mastercard's cross-border acquiring rules, retailers paid more in bank services to receive card payments than if they had been free to shop around for lower-priced services. This led to higher prices for retailers and consumers, to limited cross-border competition and to an artificial segmentation of the Single Market. On this basis, the Commission concluded that Mastercard's rules prevented retailers from benefitting from lower fees and restricted competition between banks cross border, in breach of EU antitrust rules," it said.
Mastercard amended its rules "in view of the entry into force of the Interchange Fee Regulation", ending its infringement of competition law on 9 December 2015, the Commission said.
A 10% discount to the penalty levied by the Commission was applied to recognise Mastercard's cooperation with its investigation.
EU competition commissioner Margrethe Vestager said: “European consumers use payment cards every day, when they buy food or clothes or make purchases online. By preventing merchants from shopping around for better conditions offered by banks in other Member States, Mastercard's rules artificially raised the costs of card payments, harming consumers and retailers in the EU."
The EU’s Interchange Fee Regulation came into force in June 2015 and provides a harmonised regime for the fees charged by credit card issuers from a merchant’s payment service provider.
The EU rules impose a cap of 0.2% of the transaction value for consumer debit cards, and 0.3% for credit cards. Commercial cards are excluded.
The caps apply to any transaction where both the merchant’s acquirer and the card issuer are located within the European Economic Area (EEA). The caps do not apply where either party is located outside the EEA.
Lower caps can be set by member states and the regulation also imposes a number of other rules on card schemes, issuers and merchants.
There is also a separate ongoing investigation concerning Mastercard's inter-regional interchange fees, i.e. fees charged on payments made in the EEA with cards issued by banks outside the EEA.