Mastercard sued for alleged misuse of power over card payments

By Leandra Monteiro

The ACCC has instituted proceedings in the Federal Court against Mastercard Asia/Pacific Pte Ltd and Mastercard Asia/Pacific (Australia) Pty Ltd, for allegedly engaging in conduct with the purpose of substantially lessening competition in the supply of debit card acceptance services.

Mastercard’s alleged anti-competitive conduct commenced in late 2017 in the context of the Reserve Bank of Australia’s least cost routing initiative. The ACCC investigated allegations that Mastercard engaged in anti-competitive conduct by offering certain large merchants cheaper interchange rates (known as ‘strategic merchant rates’), for processing credit card payments if they agreed to process Mastercard-eftpos debit card payments through the Mastercard network.

The RBA’s least cost routing initiative aimed to increase competition in the supply of debit card acceptance services and reduce payment costs for businesses by allowing them to choose the lowest cost network to process their transactions. This enabled businesses to choose whether their debit transactions were processed by Visa, Mastercard, or eftpos, with eftpos often being the cheapest option.

It is alleged that in response to the least cost routing initiative, Mastercard entered into agreements with more than 20 major retail businesses, including supermarkets, fast food chains, and clothing retailers.

The agreements gave these businesses discounted rates for Mastercard credit card transactions, provided they committed to processing all or most of their Mastercard-eftpos debit card transactions through Mastercard rather than the eftpos network. This meant that these businesses would not process significant debit card volumes through the eftpos network even though eftpos was often the lowest cost provider.

“We allege that Mastercard had substantial power in the market for the supply of credit card acceptance services, and that a substantial purpose of Mastercard’s conduct was to hinder the competitive process by deterring businesses from using eftpos for processing debit transactions,” said ACCC Chair Gina Cass-Gottlieb.

“We are concerned that Mastercard’s alleged conduct meant that businesses did not receive the full benefit of the increased competition that was intended to flow from the least cost routing initiative.”

“Reducing costs for businesses enables them to offer their customers better prices. Making sure the major card schemes, Mastercard, Visa and eftpos, compete vigorously is important for both those businesses and their customers,” Cass-Gottlieb said.

“Promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment systems, is a priority for the ACCC. Financial service providers should be on notice that we will not hesitate to take action in response to concerns raised about anti-competitive conduct in this important sector of Australia’s economy.”

“This case also demonstrates the ACCC’s heightened interest in addressing competitive harm caused by exclusive arrangements engaged in by firms with market power,” Cass-Gottlieb said.

The ACCC is seeking declarations, penalties, costs, and other orders.