Court of Justice confirms the European Commission’s decision on MasterCard’s multilateral interchange fees

The European Commission by its decision of 19 December 2007 considered that the multilateral interchange fees (MIF) applied within the MasterCard payment system breached EU antitrust rules. As a rule, MIF are equivalent to a proportion of the price of a payment card transaction that is retained by the card-issuing bank. The cost of the MIF is charged to merchants in the more general context of the costs which they are charged for the use of payment cards by the financial institutions which acquire their transactions (acquirers).

The Commission, following complaints lodged inter alia by EuroCommerce, established that the MIF had the effect of setting a floor under the costs charged to merchants and thus constituted a restriction of price competition. The Commission also noted that it had not been demonstrated that the MIF could generate efficiencies capable of justifying their restrictive effect on competition. On the basis of those findings, the Commission ordered MasterCard and the companies representing it (MasterCard Inc. and its subsidiaries MasterCard Europe and MasterCard International Inc.) to bring the infringement to an end by discontinuing the MIF within six months. MasterCard judicially appealed the Commission’s decision and the EU’s General Court, by a judgment rendered on 24 May 2012, dismissed on the merits the appeal lodged by MasterCard, thereby confirming the Commission’s decision. MasterCard afterwards then brought an appeal before the Court of Justice by which it sought to have the General Court’s judgment set aside.

The Court of Justice by its recent ruling of 11 September 2014, “MasterCard Inc. et al vs. European Commission”, case C-382/12 P1, dismissed MasterCard’s appeal and confirmed the decision of the a quo court.

As regards the question whether the MIF are objectively necessary for the MasterCard system, the Court reasons that the adverse consequences that could affect the functioning of the MasterCard system in the absence of the MIF do not, in themselves, mean that the MIF must be regarded as being objectively necessary, as the a quo court duly found that the system was still capable of functioning without those fees.

In terms of appraisal of the anti-competitive effects of the MIF, the Court of Justice considers that the General Court confirmed the Commission’s hypothetical analysis according to which some of the problems created by elimination of the MIF could be resolved by prohibiting ex post pricing (a solution pursuant to which issuing and acquiring banks are prohibited from defining the amount of the interchange fees after a purchase has been made by a cardholder). In this setting, the Court of Justice found that the General Court should have ascertained, in the context of its analysis of the effects of the MIF on competition, whether that situation was likely to arise otherwise than by means of a regulatory intervention. Still, the Court of Justice reasoned that that such error of law does not have a bearing on the analysis of the competitive effects of the MIF carried out by the General Court, since the a quo court was in any event justified in relying on the Commission’s hypothesis. The only other option which presented itself at first instance and which was capable of enabling the MasterCard system to operate without MIF was in fact the hypothesis of a system based on a prohibition of ex post pricing.

The Court also dismissed the argument of the appellants pursuant to which the General Court did not sufficiently address the competitive effects of the MIF and emphasized that the a quo court performed a detailed examination in its judgment in order to determine in particular whether the MIF limit the pressure which merchants can exert on acquirers of payment card transactions when negotiating the costs charged by those acquirers. In this setting, the Court confirmed the General Court conclusion that the MIF had restrictive effects on competition.

Equally, the Court established that the General Court took into account the two-sided nature of the system, since it analysed the role of the MIF in balancing the ‘issuing’ and ‘acquiring’ sides of the MasterCard system, while recognising that there was interaction between those two sides. Furthermore, in the absence of any proof of the existence of appreciable objective advantages attributable to the MIF in the acquiring market and enjoyed by merchants, the General Court did not examine the advantages flowing from the MIF for cardholders, since such advantages, per Court’s reasoning cannot, by themselves, be of such a character as to compensate for the disadvantages resulting from those fees. This reasoning is, from our standpoint, a major set-back for consumers, as the Court, albeit in a setting of a two-sided market, did not ponder the advantages of MIF for consumers, specifically those currently provided to cardholders by card payment systems.

In the week that the Court of Justice confirmed the European Commission decision in the MasterCard MIF antitrust file, the General Court annulled, by its judgment of 9 September 2014, in case T-516/112, the European Commission decision which impeded Mastercard’s access to a study elaborated by a third party to the Directorate-General for Competition of the European Commission on the costs and benefits to merchants of accepting different payment methods.

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