Are Payment Card Systems' Multilateral Interchange Fees Anticompetitive by Object under EU Competition Law?

Abstract

Hungarian banks fixed the interchange fee to be used in the two major payment card systems (MasterCard and Visa) on a multilateral basis. This fee is used in inter-bank clearing and is paid by the acquiring bank (which operates the bankcard terminal installed at the merchant) to the issuing bank (which issued the bankcard used for the payment). When the customer pays by card, the acquiring bank charges a fee to the merchant. Afterwards, the acquiring bank passes a portion of the merchant fee on to the issuing bank. In this system, the issuing bank has two sources of income: the cardholder may pay a fee for the issuance of the payment card, and the acquiring bank shares a part of the merchant fee. This makes the payment card industry a two-sided market. These fees were normally not fixed on a bilateral basis but by means of a single uniform multilateral interchange fee (MIF). This practice gave rise to various competition investigations in Europe, where competition authorities approached the MIF in various ways: some considered it to be an agreement to be assessed by its effects, some pronounced this arrangement anticompetitive by object. In the end, the controversies about the MIF resulted in a European legislative intervention in the form of a regulatory cap. While the MIF may have the appearance of price fixing, as the fee paid in consideration of the services provided by the issuing bank is fixed uniformly by competitors, this conclusion is overshadowed by the fact that the agreement embraces both sides of the market (sellers and buyers), and the MIF may be regarded as ancillary to the effective operation of the payment card system and as a means to encourage use of this payment method. In Case Vj-18/2008 MIF, the Hungarian Competition Office (HCO) used a combination of the two approaches: it condemned Hungarian banks for fixing the domestic MIF and for treating the two payment card companies alike as anticompetitive both by object and effect. The decision was appealed, and the Hungarian Supreme Court (Kuria) submitted four preliminary questions. The Court of Justice of the European Union (CJEU) answered the first two questions, but deemed the remainder to be inadmissible. The first question raised no difficult issues of interpretation. The Court confirmed that anticompetitive object and anticompetitive effect may be used as parallel legal bases by competition authorities and private plaintiffs: it is not against the law to pronounce the same agreement to be anticompetitive both by object and effect. The second question proved to be more difficult: the Hungarian Supreme Court requested the CJEU's guidance as to whether Hungarian banks' fixing of the interchange fee on a multilateral basis and uniformly in respect of the two payment card systems (MasterCard and Visa) was anticompetitive by object.