AGCM

PRESS RELEASE

PAYMENT CARDS: ANTITRUST AUTHORITY FINES MASTERCARD AND EIGHT BANKS FOR AGREEMENTS RESTRICTING COMPETITION. OVER SIX MILLION EUROS IN FINES.

Different behaviors used to inflate the interbank credit card payment fee by bundling it together with business membership fees, with trickle-down effects for consumer price burdens. Mastercard is being required to establish a fee that is economically justifiable, and the banks will have to review the clauses governing store membership requirements.

In a meeting on 03rd November 2010, the Autorità Garante della Concorrenza e del Mercato ruled that the Mastercard company and eight banks (Banca Monte dei Paschi di Siena, Bnl, Banca Sella Holding, Barclays Bank, Deutsche Bank, Intesa Sanpaolo, ICBPI and Unicredit) had established agreements restricting competition designed to maintain high interbank fees for payments by credit or debit cards (aka Maestro card) issued by the Mastercard circuit by bundling this type of cost together with store membership fees, with direct consequences for consumer prices. These banks operate in Italy and are licensed for the MasterCard brand, and they play an active role - as revealed by the Antitrust Authority measure - in the governance of this circuit.
According to the Antitrust Authority, which concluded investigation with over 6 million euros in fines, the anti-competitive behaviors concerned:
Mastercard's policy, as an association of businesses, of fixing an Italy-specific multilateral interbank fee (Mif) that was not derived from the system's overall economic efficiency: on average, the Mif, which the bank that subscribes operators (the acquirer) pays to the bank that issues the cards (the issuer), is equal to 0.90% of each transaction, which is 30-40% higher than the fee charged by Visa (the main competitor circuit), in comparison to the 0.30% charge for cross-border operations. Mastercard introduced the Italian Mif in April 2007, in anticipation of the European Commission's upcoming decision (which was soon finalized) to make dramatic cuts in the cross-border fees that had previously been applied to domestic markets as well. Incentives for Mif inflation derive from: the fact that higher Mifs, which represent the final item paid to card issuer banks, increase the direct proceeds realized by the card issuer banks themselves; the fact that the proceeds of acquirer banks, which stipulate contracts with operators, increase as the transaction volume of the expanding circuit increases; and lastly, the fact that high Mifs lead to greater brand-name exposure for the MasterCard circuit itself, which translates into increases in circuit-wide proceeds from license-holders.
By establishing specific clauses that hindered the making of comparisons with other circuits/payment instruments characterized by lower Mifs, the banks that stipulate contracts with stores and large-scale distributors gave an undue advantage to the MasterCard brand, the circuit as a whole and the banks themselves. The collection of licensing contracts between the MasterCard circuit and individual banks/license-holding companies represents a vertical band of agreements. Individual banks used the membership mechanism to manifest a unitary agreement with Mastercard in order to promote the circuit's expansion by passing the interbank fee on to the stores and, consequently, to the prices effectively applied to consumers. More specifically, instead of differentiating the operator fees (charged by banks) on a circuit-by-circuit basis, a single ‘merchant fee’ that already incorporated Mastercard's higher Mif was applied across the board.
The measure that was adopted gives Mastercard and the eight banks a period of 90 days to demonstrate (in the form of written reports) to the Antitrust Authority that these anti-competitive behaviors have ceased. Mastercard must define an economically justified and efficient interbank fee, and the banks and the circuit must define membership contracts that are privy of constraints restricting competition.
The fines are listed below: the Antitrust Authority calculated the fines for this vertical band of agreements on a clause-by-clause basis, with acquirer banks being differentiated by the number of clauses adopted and the specific adoption procedures.

MasterCard Incorporated                           € 2,700,000
Banca Monte dei Paschi di Siena S.p.A.       € 910,000
Banca Nazionale del Lavoro S.p.A.              € 240,000
Banca Sella Holding S.p.A.                         € 360,000
Barclays Bank plc.                                     € 50,000
Deutsche Bank S.p.A.                                € 200,000
Intesa Sanpaolo S.p.A.                              € 700,000
ICBPI S.p.A.                                             € 490,000
Unicredit S.p.A.                                         € 380,000


Rome, 04th November 2010