The European Union's executive arm dropped its case against MasterCard transaction fees today, ending a 15-month battle that helped sow confusion among banks building a new pan-EU payments system.
The battle with MasterCard was part of a wider offensive by Brussels to increase economic growth by making a single market in goods and services more accessible through cheaper banking and payment fees.
The European Commission ruled in December 2007 that the US company's cross-border multilateral interchange fee (MIF) on its credit and Maestro debit cards levied on retailers breached EU antitrust rules and must be changed within six months.
MasterCard rejected the ruling and appealed to the European Court of Justice in a case that has yet to be concluded. It also bumped up its fees last October and reintroduced a MIF.
EU Competition Commissioner Neelie Kroes said on Wednesday she saw no need to pursue MasterCard further due to undertakings made by the US company to cut its MIF transaction fees to 0.3 percent for credit cards and 0.2 per cent for debit cards.
MasterCard's cross-border fees ranged from 0.8 to 1.9 per cent in 2007. Ms Kroes said steps taken by MasterCard to slash its fees would benefit retailers and consumers.
"We will be monitoring implementation closely in coming months," Ms Kroes said. A probe into rival Visa Europe's 0.7 percent transaction fee continues, she said.
The Commission said MasterCard had also agreed to:
- use a new methodology for determining cross-border fees;
- withdraw from July fee hikes imposed in October 2008;
- increase transparency and competition in payment cards.
Retailers, which have dubbed the MIF a tax on consumption, have long campaigned to scrap the transaction fee.
The EU is introducing a single euro payments area (SEPA) so that consumers can make credit and debit payments anywhere in the 27-nation bloc in euros from a single bank account.
But confusion over the legality of MIF left banks unsure about the business model to use for launching rival cross-border payment card schemes, threatening SEPA's rollout.
In a bid to encourage banks to push ahead with new payment card schemes to rival MasterCard and Visa, the Commission and the European Central Bank said last week banks could use the MIF fee structure until November 2012.
"In particular, the Commission makes clear that a general per transaction multilateral interchange fee (MIF) for direct debit transactions does not seem justified for efficiency reasons and, therefore, does not appear compatible with EU antitrust rules," the Commission and ECB said last week.
Reuters