Comments on the European Commission’s MasterCard Decision

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Michael Katz, Apr 03, 2008

n December 2007, the European Commission issued its decision with respect to MasterCard’s policy of setting default values for Intra-EEA and Single Euro Payments Area (SEPA) interchange fees, which apply in the absence of bilateral agreements between issuers and acquirers. The fundamental logic of the European Commission’s approach was the following: MasterCard’s setting of default interchange rates constitutes a price-fixing agreement by or on behalf of MasterCard member banks that “restricts competition between acquiring banks by inflating the base on which acquiring banks set charges to merchants.” Because it constitutes a price-fixing agreement, the conduct must be shown by MasterCard to satisfy four conditions in order not to be found illegal. The Commission found that MasterCard failed to meet its evidentiary burdens with respect to any of the first three conditions and, thus, that its policy of setting interchange fees is illegal. In this note, the author addresses the core of this argument and whether or not MasterCar’s setting of default interchange fees constituted price-fixing. Download the entire article available in the column on the left.

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