November 12, 2024, 13:44 GMT | Insight) — Scrutiny for Mastercard and Visa from the European Commission over shifting card charges for merchants and acquirers includes regulators asking market players whether intervention is needed over “continuous” fee changes, a lack of transparency or difficulties in negotiation. It emerged earlier this month that the EU antitrust regulator sent questions in August to the two major payment card scheme operators as well as retailers and banks that handle merchants’ payments, drilling into seven years of conduct to see how the fee landscape has changed — and if customers are suffering (see here). In its detailed questions to market players, seen by MLex, the commission picks apart the various fees that merchants and acquirers pay — from core fees, to non-compliance charges and optional card scheme fees — to see how easy the system is to navigate. The commission is gathering data on the period from 2016, the first year after the introduction of EU caps on certain fees, up to 2023. Legislation known as the Interchange Fee Regulation, passed in 2015, limited certain charges on debit and credit card transactions, but retailers have long complained that Mastercard and Visa are circumventing the law by raising other charges. The questionnaires from the EU’s antitrust department seek data on processing fees, scheme fees for acquirers and fees for so-called “market development funds.” The commission wants those to be broken down further to cover mandatory fees, optional fees and fees for not complying with the system rules. Generally, the commission seems to be looking into whether the fees are lower when Visa and Mastercard face competition in a particular country by a national card scheme. More specifically, the regulator devotes significant enquiry into how transparent fee structures are. Does the “continuous introduction of the new fees and deletion of existing fees” harm customers, it asks.
Do merchants or acquirers get consulted before fees change and how could the system be made simpler, the commission inquires. Furthermore, are higher fees passed on from acquiring banks to merchants?
Officials dedicate a long line of questioning to fees imposed by card schemes based on certain kinds of behavior or not complying with scheme rules. For example, if merchants agree to enable Click-to-Pay functionality or supply more data on transactions they can benefit from lower fees. The questions indicate the commission wants more transparency on the level of non-compliance fines and their increases, the justification for their imposition, the process for warning merchants or granting any payment flexibility, and whether retailers can appeal against the fines. Further clarity is sought on “optional fees” and whether they are truly optional for merchants, as well as how retailers can really negotiate fees. “Are individual fees negotiable, or is negotiation taking place on a package of fees including through the granting of rebates or incentives?” the commission asks.
Retailers have long pushed for action against Visa and Mastercard and today welcomed the investigation.“We have seen how scheme fee increases and the introduction of new scheme fees have increased our costs without it being clear what value or costs are behind them,” said Atze Faas, payments adviser at Eurocommerce.“Ultimately consumers are paying the price for something they and we have no influence on. All that money is flowing to the US, weaking European competitiveness.”
Both Visa and Mastercard confirmed receipt of questionnaires from the commission in August. They said they were cooperating with the regulator. While the interchange fee regulation puts a ban on attempts to circumvent its fee caps by raising other fees, EU competition law can also clamp down on certain kinds of loyalty-inducing behavior.
The commission asks if negotiations on fees are “conditioned” on accepting certain cards or signing up to other services from the scheme. Equally, such terms could exclude other providers, such as a national scheme operator, according to the line of questioning.
After decades of antitrust investigation, the interchange law from 2015 was designed to set the clear rules of the market for card schemes, capping fees at maximum levels. These limits were then retained after an initial review into the functioning of the law.
Since then the commission’s scrutiny of payments markets has been low-key, steering clear of antitrust investigation and letting the interchange fee regulation do its job. The intense engagement heralded by the latest round of questions hints that this might be about to change. Please e-mail editors@mlex.com
November 1, 2024, 11:10 GMT | Insight) — Mastercard has said it has received a formal request for information from the European Commission as part of a preliminary antitrust probe into “network fees related to acquirers.” The scrutiny started in August, and Mastercard is cooperating with the regulator, the company said. Visa also confirmed the commission has sought information from it. “Visa received a request for information from the European Commission in late August. We are currently working through the request to supply the relevant information,” a spokesperson said.
Mastercard and Visa run payments-card networks that has attracted intense antitrust scrutiny over the years, primarily focused on the charging of “interchange fees” on transactions. In July, they wrapped up the final strand of antitrust scrutiny into these fees, extending voluntary caps on the charges for non-EU cards deployed within the bloc (see here). On Thursday, Mastercard disclosed that a month later it received “a formal request for information from the European Commission seeking documents and information in connection with an investigation into alleged anticompetitive behavior of certain card scheme services in the European Union/EEA.” “The request focuses on Mastercard’s practices regarding network fees related to acquirers. Mastercard is cooperating with the European Commission in connection with the request.” The Mastercard and Visa payment systems are made up of issuers and acquirers. The latter are usually financial institutions that function as intermediaries between merchants and card payment networks. Card networks have faced accusations from retail groups that caps on certain “interchange fees” have led to increases in other fees to compensate (see here). A spokesperson for the commission said: “We can confirm the sending of the request for information. We have no further comment to make, as the investigation is ongoing.” editors@mlex.com