ECJ dismisses MasterCard appeal

On 11 September 2014, the Court of Justice of the European Union (ECJ) handed down its judgment in MasterCard and others v Commission. The ECJ confirmed the European Commission's 2007 decision that MasterCard's cross-border multilateral interchange fees (MIF) infringed Article 81(1) of the EC Treaty (now Article 101(1) TFEU). The General Court had previously upheld the Commission's decision in May 2012 (see our June 2012 newsletter).

Interchange fees are charged by the card issuing bank to a merchant's bank (the acquiring bank) for each sales transaction made by that merchant where payment is made by credit or debit card. The Commission found: (i) that the setting of the MIF constituted a decision of an association of undertakings that infringed Article 101(1) as it sets an effective minimum price which merchants must pay for card payment services; (ii) that the MIF was not objectively necessary for the operation of the MasterCard payment system; (iii) and the MIF did not satisfy the Article 101(3) exemption criteria. The General Court upheld the Commission's findings.

The ECJ upheld the General Court's judgment and dismissed the appeal brought by MasterCard and the cross-appeals brought by RBS and Lloyds Banking Group. In particular:

• the ECJ upheld the Commission's characterisation of MasterCard as an association of undertakings, even after MasterCard's IPO, on the basis of: (i) the continued decision-making powers held by the banks after the IPO (although not over the MIF); and (ii) the commonality of interests between MasterCard, the banks, and (after the IPO) its shareholders;
• the ECJ rejected MasterCard's argument that the General Court had applied the incorrect legal test in its assessment of whether the MIF was objectively necessary to the MasterCard scheme. The ECJ confirmed that the fact an operation may be more difficult to implement or even less profitable absent a relevant restriction did not mean that that restriction could be regarded as objectively necessary; and
• the ECJ accepted that the General Court had made an error of law by adopting the same counterfactual scenario when assessing both whether the MIF was a restriction of competition and, if so, whether that restriction was objectively necessary. However, it concluded that this error had no impact on the operative part of the judgment and therefore did not merit the General Court's judgment being set aside.

Although this judgment marks the end of the road for MasterCard in the EU proceedings, regulatory and legislative initiatives focusing on the card schemes continue. MasterCard faces follow-on damages actions in the UK courts brought by merchants, who will now be able to rely on the Commission decision which has been confirmed by the ECJ. In the UK, the Competition and Markets Authority has also announced that it is considering its next steps in its own (currently suspended) investigation into both the MasterCard and Visa MIF arrangements. Finally, the European Parliament is expected to pass a new Regulation next year capping average domestic and cross-border MIFs for both credit and debit card scheme transactions.

Please click on the links below for the other articles in the September 2014 competition newsletter:

• Commission imposes €138m fines on smart card chips cartel
• Court of Justice clarifies limits to fines in relation to acquired companies
• Belgian guidelines on setting antitrust fines
• New cartel immunity policy in Australia