EU Attacks MasterCard’s ‘Mad Campaign’ to Derail Card-Fee Curbs

MasterCard Inc. waged a “mad campaign” to derail caps on card fees, the European Union’s financial services commissioner said today as he unveiled plans to slash charges by 6 billion euros ($8 billion) a year.

Michel Barnier said MasterCard used misleading information in its lobbying against proposals to cap interchange fees at 0.2 percent for debit card payments and 0.3 percent for credit cards. The limits target card systems also operated by Visa Europe Ltd. where banks charge each other interchange fees, or swipe fees, for handling payments.

MasterCard publicly attacked the EU’s work to rein in the fees “before even the commission text was published, using details that weren’t correct, and before even the democratic process had started,” Barnier said in an interview after presenting his proposals in Brussels. “Visa had a much more responsible attitude.”

EU antitrust regulators have targeted swipe fees on credit-and debit-cards for more than a decade, warning that the way the charges are collectively agreed on is anti-competitive. Authorities this year started a probe into Purchase, New York-based MasterCard’s charges on foreign card payments such as when tourists go shopping in the bloc.

“Before we had any idea what our proposal was going to be, I was bombarded in the papers” by MasterCard, including through advertisements made to look like news articles and “disputed” studies, Barnier told reporters in Brussels. “I found this campaign to be quite counter-productive and unacceptable.”


MasterCard is appealing the outcome of a probe into rates on cross-border credit-card payments at the EU’s highest court.

“We have the utmost respect for Commissioner Barnier and fully support the goal of encouraging electronic payments to stimulate economic growth while protecting European consumers,” MasterCard said in an e-mailed statement responding to his comments.

“Based on the press statements and legislative proposals released by the commission today, we are concerned about the harm these proposals will cause to consumers and small merchants in the EU.” the company said.

The 0.3 percent cap on credit card interchange fees is below the “levels prevailing in all member states” of the EU according to the commission. The 0.2 cap on fees for debit-card payments is below current levels in EU nations including Germany and Poland, the regulator said.

Danish System

Interchange fees vary widely across the bloc, reaching as high as 1 percent in Poland and Hungary and set at zero in the case of Denmark’s national debit card scheme.

Debit card interchange fees in the U.K. would have to fall by about a fifth under the EU plans.

The EU plans will complement the bloc’s antitrust probes and “prevent excessive levels of these fees across the board,” Joaquin Almunia, the EU competition chief, told reporters. “New players will be able to enter the market and offer innovative services, retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices.”

The EU plans draw a distinction between so-called four-party systems -- such as those run by Visa and MasterCard, where payments are made between retailers’ and consumers’ banks -- and three-party systems run by American Express and PayPal Inc., where the payment card provider, rather than banks, stands in the middle of a transaction.

American Express

While three-party systems apply charges, these aren’t the same as interchange fees, which are passed between banks. That means American Express Co., the biggest credit-card issuer by purchases, would only be affected when its brand is licensed for use by other companies in ways that involve interchange fees. This applies to about 9 percent of American Express’ business, according to EU data.

“There is little evidence to support the claims that these proposals will be beneficial to consumers,” Peter Ayliffe, chief executive officer of Visa Europe, said in an e-mail. “We are concerned that these proposals will be detrimental to the innovation that will support European economic growth,” he said.

While EU antitrust regulators have reached agreement with Visa Europe, probes are open against Visa Inc. and Visa International, Almunia said.

Under the EU plans, fee caps would initially apply to cross-border transactions, and then be expanded to cover domestic payments in the bloc after 22 months.

Retailers have campaigned against interchange fees, saying that they push up the final costs of goods and services, and amount to a hidden charge on consumers. Card companies insist that the fees ensure that retailers make a fair contribution to the underlying costs of electronic payment systems.

Payments Infrastructure

Today’s plans would have “wider benefits for growth in the European digital single market,” Ian Cheshire, group chief executive officer of Kingfisher Plc, Europe’s largest home-improvement retailer, said in an e-mail. “By resolving the problem of interchange fees, Europe will be better able to realize the ambition of a single online market for Europe, with a fair payments infrastructure at its core,” he said.

While interchange fees can be agreed on by banks, card companies such as Visa and MasterCard provide default ones that are used unless lenders comes to their own bilateral arrangements.

Company Firewalls

Aside from fee caps, the EU plans would also require card companies to put firewalls between business units that administer card networks and those providing optional payment processing services to banks.

The firewall plan “would hamper innovation and security in payments and unbalance the marketplace,” Ayliffe said.

The EU also proposed a broader overhaul of its rules on payments in a bid to boost competition and better protect consumers.

The plans include capping the losses faced by a victim of card fraud at 50 euros, compared with 150 euros at present, and making it easier for non-bank companies that offer payment services to operate across the 28-nation EU.

Other parts of the proposals would extend EU security and consumer protection rules for payments to transactions made using smartphones.

The “Internet offers new possibilities,” Almunia said. “We are lagging behind and thanks to this new proposal we can create new opportunities for everybody.”