13 October 2005

Competition Law: OFT rules in MasterCard Interchange Fee

The OFT has published its decision on MasterCard's interchange fee. Essentially, it has found that there was an infringement of art 81 (1) of the Treaty of Rome and the Chapter 1 prohibition under s.2 of the Competition Act 1998. For those who are interested, an "interchange fee" is an interbank payment made between the issuer and the acquirer, and typically is paid by the acquirer to the issuer. An agreement between MasterCard and its member banks set the level of a fallback multilateral interchange fee which applied to all transactions made using UK issued MasterCard cards between 1 March 2000 and 18 November 2004. The OFT was satisfied that that practice has been discontinued.

According to the OFT, the agreement infringed art 81 (1) EEC and the Competition Act 1998 in that it gave rise to a collective agreement on the level of the multilateral interchange fee and resulted in the unjustified recovery of certain costs incurred by MasterCard's UK members and other MasterCard licensees through the multilateral interchange fee. Since the offending provisions had come to an end the OFT imposed no sanction on MasterCard and gave no further directions.

This decision was of some personal interest to me because I was the first legal adviser to VISA International for Europe, the Middle East and Africa between 1984 and 1985 and much of my time was spent in notifications and referrals of various provisions of that payment group's operating regulations to what was then called DGIV. I can't remember much about those transactions (and even if I could I wouldn't for reasons of employer-employee confidentiality) but I have noticed the Commission's Decision of 2 July 2002 on VISA's multilateral interchange fee. That notiication resulted in a conditional exemption for VISA International. If I have time, I will read through the two decisions and see if there are any lessons to be discerned and let you all know.

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