Bancherul - BANCI / ENGLISH / MasterCard Europe President: Don’t Try To Fix What Isn’t Broken

MasterCard has its day in court with the European Commission and sets out what is at stake for European payments

Waterloo, Belgium, 8 July 2011, The General Court of the European Union held a hearing today on MasterCard’s appeal against the European Commission’s 2007 decision on the company’s cross-border consumer interchange fees in the EEA, said the company in a press release.

“What is at stake in this case is the future direction of European payments -- whether or not consumers and businesses will have more or fewer choices in how they want to pay, and whether payment methods in the EU will remain world class,” said MasterCard Europe president Javier Perez.

“We’re asking: Why is the Commission trying to fix what isn’t broken? The market is moving fast and in ways that no one -- including regulators -- can easily predict. We’re concerned that government intervention threatens the continued development of payments in
the EU, and that European consumers and merchants will end up missing out on having more convenient, more secure and more advanced payment options that will make consumers’ lives easier and retailers’ businesses more profitable.”

Perez pointed out that since the Commission first began examining interchange fees in 2000, a lot has changed in the payments industry. Increased competition and innovations such as contactless, mobile, and e-commerce payments are being driven by retailers, banks, telecommunications companies, technology companies,
and other new players as well as by MasterCard, resulting in major technological advances, significant growth in electronic payment transactions and the acceptance of different kinds of payments across Europe.

“We welcome these new developments and are competing harder than ever before in this rapidly changing environment,” says Perez.
“The real advantage of an open payment system like MasterCard’s is that more competition is introduced throughout the value chain.

MasterCard’s global network allows thousands of banks to provide advanced payment services to hundreds of millions of consumers and millions of retailers around the world.

Interchange is the most transparent and efficient way to achieve the right balance among all participants in the system. That’s what today’s hearing and this case are really about.”

“We’re pleased that we had our day in court and we look forward to the end of this dispute so that we can focus all of our attention on creating an advanced, wellfunctioning internal market for payments in Europe and to realizing the full potential of SEPA for consumers and businesses throughout the region. Our main goal remains the same: replacing cash with electronic payments for the benefit of
European consumers, retailers, governments and society as a whole.”

On March 3, 2008 MasterCard Europe applied to the European General Court in Luxembourg to annul the European Commission’s decision on MasterCard Europe’s cross-border consumer interchange fees. The December 19, 2007 decision required the company, among other things, to repeal its intra-EEA fallback interchange fees.

On April 1, 2009 the company announced it had reached an interim arrangement with the European Commission regarding its cross border consumer interchange fees. While MasterCard was pleased that the Commission recognised the legitimacy of interchange fees in open four-party payment systems, the company considers the levels of interchange too low and therefore continued the appeal
against the Commission decision, and believes it has strong arguments that the decision should be reversed.

In its appeal, MasterCard’s concerns with the decision focus on:
• the Commission’s failure to recognize that four-party payment systems
cannot operate without default settlement terms between banks that issue cards to consumers and those that acquire transactions for merchants, which requires the setting of an interchange fee;
• the Commission’s refusal to recognize the efficiencies that four-party
payment systems create and the fairness of MasterCard’s interchange fees;
and
• the Commission’s inaccurate conclusion that, despite MasterCard’s May 2006 IPO, MasterCard and its customers continue to be “an association of undertakings”, and its mischaracterization of MasterCard’s interchange fees as decisions of an association that restrict competition under EC Treaty rules.

For more information on the European Commission decision and MasterCard’s response, visit the MasterCard website at
http://www.mastercard.com/us/company/en/ourcompany/interchange.html.