The CMA has decided to close its investigations of MasterCard’s and Visa’s multilateral interchange fees after it was confirmed that an EU regulation that will cap these fees will soon come into force.
In November 2014, the Competition and Markets Authority (CMA) announced that as a result of the European Union’s (EU) impending Interchange Fee Regulation (IFR) it was not planning, at that time, to progress the investigations. The IFR was approved by the Council of the European Union on 20 April 2015 and caps on interchange fees will take effect later in 2015.
As the IFR will deal with the harm to consumers and retailers which, it is suspected, is caused by current levels of interchange fees, the CMA has confirmed that it will now close its cases.
The CMA‘s predecessor, the Office of Fair Trading (OFT), played a significant role in the drive to deal with interchange fees. The OFT opened the investigations into MasterCard and Visa on interchange fees before the European Commission (EC) itself started taking action. It also intervened at the General Court and the Court of Justice to support the EC in defending its decision that MasterCard’s European interchange fee arrangements infringed competition law, thus setting an important legal precedent. In addition, the OFT played an important role in making a case for the establishment of the UK Payment Systems Regulator, which will be the competent authority for the monitoring and enforcement of compliance with the IFR in the UK.
Caps on the levels of multilateral interchange fees (MIFs) that may apply to transactions made using MasterCard and Visa consumer payment cards will take effect 6 months after the IFR enters into force. Under the IFR, MIFs will be capped at no more than 0.3% and 0.2% of the value of the transaction for credit card transactions and debit card transactions respectively.
Currently Visa typically charges 0.2% of the transaction value plus 1p (capped at 50p) for debit card transactions and 0.77% of the transaction value for consumer credit cards. MasterCard typically charges 7 to 11p per MasterCard and Maestro debit card transaction and 0.8% of transaction value for consumer credit cards.
The CMA consulted with the British Retail Consortium regarding its provisional decision to close the investigations before finalising its decision to do so.