ACCC v Mastercard

Facts and summary

The ACCC allege Mastercard engaged in conduct for the purpose of substantially lessening competition in the supply of debit card acceptance services.

The ACCC claims that in response to the RBA’s least cost routing initiative Mastercard entered into agreements with major retailers, giving them discounted rates for Masercard credit transactions on the proviso that the 'committed to processing all or most of their Mastercard-efpos debit card transactions through Mastercard rather than the eftpos network’, even though eftpos was often the cheapest option.

ACCC Chair, Gina Cass-Gottlieb, said;

‘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’

Concise statement

The ACCC published its concise statement ➤

See also media release:

ACCC media release

Mastercard in court for alleged misuse of market power over card payments

30 May 2022

The ACCC has instituted proceedings in the Federal Court against Mastercard Asia/Pacific Pte Ltd and Mastercard Asia/Pacific (Australia) Pty Ltd (together, Mastercard), 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 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,” ACCC Chair Gina Cass-Gottlieb said.

“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,” Ms 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,” Ms Cass-Gottlieb said.

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

Notes to editors

A business with substantial market power will only be in breach of the Competition and Consumer Act 2010 if its conduct has the purpose, effect or likely effect of substantially lessening competition in a relevant market.

Background

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.

Mastercard debit cards and credit cards are accepted by a significant proportion of merchants across Australia. Almost all Mastercard debit cards are ‘dual-network’ debit cards that can be processed using either the Mastercard or eftpos debit card network. Mastercard credit cards are also a ‘must take’ form of payment for many Australian merchants.

When a consumer uses a debit or credit card to pay for goods or services, the merchant incurs fees as a result of accepting the payment. This fee will partly depend on what is called the ‘interchange rate’ that is set by a card scheme.

For dual-network debit card payments, the fees paid by a merchant can vary depending on the debit card network used for processing the transaction.

Since 2017, the Reserve Bank of Australia (RBA) has supported merchants having the ability to choose which debit card network processes their contactless (i.e. ‘tap and go’) dual network debit card payments.

This initiative, promoted by the RBA, is referred to as ‘least-cost routing’ or ‘merchant choice routing’ and is intended to improve competition in the debit card market and reduce the costs associated with processing debit card payments.

The RBA recently conducted a Review of Retail Payments Regulation, which among other issues considered competition and efficiency in the debit card market and raised concerns about potential tying conduct by international card schemes. The RBA also outlined its expectation that ‘least cost routing’ should currently be available for all ‘in-person’ transactions and available for ‘online’ transactions by the end of 2022.

In March 2021, the ACCC accepted a court-enforceable undertaking from Visa in relation to concerns that Visa may have limited competition in relation to debit card acceptance through its dealings with large merchants.

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Release number:

65/22

Docket

Docket

Justice Wigney