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20th Aug 2017

Mastercard set to lose legal battle with EU over payment fees

  • Mastercard looks set to fail in its bid to overturn a cap on card fees (Photo: Alan C.)

US credit card giant Mastercard looks set to lose its legal battle against an EU cap on its payment fees, following a legal opinion from the European Court of Justice.

The dispute follows a Commission ruling in 2007 ordering Mastercard to repeal its card interchange fees in the EU on the grounds that the fees were too high and flouted competition rules.

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Mastercard challenged the decision, which was upheld by the EU's General Court, the bloc's second highest court, in 2012.

However, this legal bid now looks likely to be thrown out by the Luxembourg-based court.

"I propose that the court should dismiss the main appeal (by MasterCard) and the cross-appeals," stated Advocate General Paolo Mengozzi in a legal opinion published Thursday (30 January).

Although the opinion is not binding on the court they are rarely overruled by judges.

Retailers, who are hit by the charges whenever they process debit and credit card payments, say that that Mastercard and Visa use their market position to charge exorbitant fees which are then passed on to consumers.

For its part, Mastercard claims that, if upheld, the ruling would hit customers' wallets.

"Practical experience in countries such as Spain, Australia and the United States shows that capping interchange shifts the costs for transactions from retailers on to consumers," MasterCard President Javier Perez said in a statement, adding that "a one-size-fits all approach to interchange across Europe will drive the cost of cards up for consumer."

The EU payments market, dominated by Mastercard and Visa Europe, is worth €130 billion per year, over 1 percent of the bloc's GDP.

But lawmakers have been trying to crack down on the charges for years.

In July EU financial services commissioner Michel Barnier unveiled plans to re-write the bloc's payment services directive that would cap charges for card payments to 0.2 percent and 0.3 percent for debit and credit cards respectively.

At present, average fees range from around 0.2 percent in Denmark and the Netherlands to over 1 percent in Germany, Hungary and Poland.

The commission plan, which is aimed at knocking €6 billion off card fees across the bloc each year, also includes provisions for a legal split between payment card systems and the companies that process transactions, a move it says will boost competition.

MEPs are expected to vote on the bill in February, leaving just two months to reach an agreement with ministers before the end of the current legislative term.

EU commission takes aim at credit card fees

Mastercard was in the EU's line of fire on Wednesday, after the bloc's internal market chief accused the credit-card giant of waging a "mad" lobbying campaign against plans to cap fees.

Credit cards often too expensive, Brussels says

Many European citizens and businesses are paying too much for using credit card systems like Visa and Mastercard because competition in the sector is being hampered, the European Commission has said.

MEPs back cap on credit card fees

MEPs have backed plans to cap card payment fees charged to shops by credit card giants Mastercard and Visa in a move aimed at saving €6 billion per year.

Brexit realities dawn in UK

Just over a year after a small majority voted for Britain to leave the EU, new realities are dawning on both the in and the out camps.

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