Commission accepts inter-regional MIF commitments from Visa and MasterCard

On 29 April 2019, the European Commission ("Commission") announced that it had accepted legally binding commitments offered by both MasterCard and Visa, capping their multi-lateral interchange fees ("MIFs") in respect of payments made in the EEA with consumer credit or debit cards issued outside the territory (e.g. when an Australian tourist uses a MasterCard of Visa card to pay a bar bill in London) – so-called "inter-regional MIFs". The companies have six months to implement the caps, and the Commitments last for five years and six months.

Background

The Commission has previously concluded its investigations into the level of MIFs set by MasterCard and Visa in respect of intra-EEA consumer credit and debit transactions, as a result of which MasterCard and Visa capped the level of their MIFs. Visa settled its investigation via commitments (in 2010 and 2014), but MasterCard battled the Commission all the way to the EU Court of Justice, and lost. The Commission's Decision that MasterCard's intra-EEA MIFs infringed competition law was upheld by the Court in September 2014.  Following these investigations, in 2015, the EU Parliament and Council adopted the Interchange Fee Regulation (Regulation 2015/751), which capped the level of MIFs for consumer credit and debit transactions for cards issued and used in the EU. In each case, MIFs were capped at 0.2 per cent for debit card transactions and 0.3 per cent for credit card transactions. 

However, the EU Regulation does not apply to cards issued outside the EU, and does not therefore cover inter-regional transactions. Further, the Commission's earlier Decisions (including earlier commitment Decisions) did not address the MIFs applied to transactions using payment cards issued outside the EEA.

Commission investigations

The Commission opened formal proceedings against MasterCard on 9 April 2013 in respect of the MIFs for payments made in the EEA by cardholders from non-EEA countries. By contrast, the Commission's investigation into Visa's inter-regional MIFs was a continuation of its earlier investigation into Visa MIFs, as Visa had only accepted commitments in respect of its intra-EEA debit MIFs (in 2010) and credit MIFs (in 2014) which were both set by Visa Europe, whereas its inter-regional MIFs are set by Visa Inc..

The Commission sent:

• a Statement of Objections ("SO") to MasterCard on 9 July 2015; and
• a supplementary SO to Visa on 3 August 2017 (following an SO on 6 April 2009 and another supplementary SO on 31 July 2012).

In each case, these SOs identified the Commission's preliminary concerns that the inter-regional MIFs may constitute an anti-competitive restriction of competition and may increase prices for European retailers when they accept payments from customers using cards issued outside the EEA, and that that may in turn lead to higher prices for consumer goods and services in the EEA.

In order to address the Commission's concerns, and to secure the closure of the Commission's investigations without any finding of infringement, MasterCard and Visa offered the Commitments. Following market-testing of the Commitments by the Commission, the Commission adopted two separate Decisions, under which MasterCard and Visa respectively will be legally bound to cap their MIFs at the following levels within six months:

"Card present" transactions:

• debit cards: 0.2 per cent of the value of the transaction;
• credit cards: 0.3 per cent of the value of the transaction.

"Card not present" transactions (e.g. on-line payments):

• debit cards: 1.15 per cent of the value of the transaction;
• credit cards: 1.5 per cent of the value of the transaction.

Both MasterCard and Visa are also required to publish their MIFs in a clearly visible manner on their websites.

Observations

These Commitment Decisions once again demonstrate that the Commission recognises that MIFs below a certain level are acceptable and do not constitute an unlawful restriction of competition. Further, the levels of the permitted MIFs in respect of "card not present" transactions clearly demonstrate that the Commission also recognises that there are factors associated with such transactions, such as risk, which justify a significantly higher level of MIF.

The Commission has stated that the Commitments will "significantly reduce the costs for retailers in the EEA" and that this is "expected to lead to lower prices to the benefit of all European consumers". However, the effect is likely to be small, given that expenditure in the EEA using consumer payment cards issued outside the EEA represents a very small proportion of all expenditure on goods and services in the EEA, and the amount of the inter-regional MIF represents a small proportion of the price of goods. Accordingly, the impact of the Commitments on costs for retailers, or on prices for consumers (which would require retailers to pass on any cost savings to consumers in the form of lower prices), is likely in practice to be limited.

Given the significant number of ongoing actions for damages brought by merchants and retailers against Visa and MasterCard, and the ongoing threat of the consumer class action against MasterCard in the UK, both parties will have been keen to avoid any Commission infringement decision which could be used as a possible anchor for new or existing proceedings.

At five years, the duration of the Commitments is relatively short, and it will be interesting to see what further action the Commission decides to take once they have expired if the parties increase the MIFs.