European Commission rules against Mastercard interchange fees

Nicole Mezzasalma

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Travel-retail Fair Payment Alliance welcomes victory against the high costs agreed by banks and passed on to retailers

The European Commission (EC) has ruled that credit card operator Mastercard’s fee system is illegal under European Union (EU) competition law and ordered the company to comply with the Commission’s order to withdraw the fees within six months or face daily penalties of 3.5% on its global turnover. The Multilateral Interchange Fee (MIF)—costs agreed by banks and passed on to retailers—accounts for up to 80% of the overall charges to retail operators, according to the Fair Payment Alliance, a campaign group of travel retailers led by Kappé International chairman Jacques Parson.

EC Competition Commissioner Neelie Kroes said: “Multilateral interchange fee agreements such as Mastercard's inflate the cost of card acceptance by retailers. In the EU, over 23bn payments are made every year with payment cards, with a value exceeding €1,350bn ($1,939bn). Mastercard's MIF is among the highest in Europe—set at more than 0.5% for debit card payments and more than 1% for credit card payments. This is twice as much as Mastercard charges in other continents.”

Mastercard said it will comply with the Commission’s order but will appeal against the decision at the European Court. The ruling will now serve as a benchmark against other credit card operators and for national competition authorities in Europe and other countries investigating national fees.

Parson said: “This is great news for the holiday season. I am very pleased with this outcome—it is something no one could have foreseen when we started our work. I should like to congratulate Commissioner Kroes for taking this bold decision because it will provide a fairer, more competitive environment for both us and our customers.”