Ouch: Mastercard Suffers a Burn in EU Transaction Fees Appeal

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MasterCard Inc. (NYSE:MA) faced an opinion from an advisor to the European Union that it didn’t like Wednesday. After making a case to the European Union that curbs on transaction fees for cross-border credit-card payments aren’t advantageous for retailers or consumers, Advocate General Paolo Mengozzi of the EU Court of Justice said in a non-binding opinion Wednesday that the court should “dismiss the appeal.” The tribunal has been known to typically follow such advice.

Bloomberg reported the news after Mastercard suffered the blow this week, and it explained that the Purchase, New York-based company is currently combatting the EU decision that forces Mastercard to continue offering reduced rates for the transaction fees that are paid by retailers. The European Commission came to the decision in 2007 to maintain the caps on transaction fees, arguing that Mastercard was inflating transaction fees paid by retailers for processing payments, but Mastercard did not agree and appealed the decision.

Instead, the company claimed that those rates are advantageous to consumers and Javier Perez, President of MasterCard, explained in an e-mailed statement via Bloomberg, following Mengozzi’s statement that, “The consumer — that’s you and me — will be the big loser if this opinion is followed by the court. Practical experience in countries such as Spain, Australia, and the U.S. shows that capping interchange shifts the costs for transactions onto retailers.”

Mastercard and Visa Europe (NYSE:V) have long set the international fees that retailers must pay to process debit and credit card payments; however, Mastercard was put under the spotlight last year when EU regulators conducted a probe into the company’s charges on foreign card payments, and it has since faced resistance to its increased fees. Bloomberg reports that, especially now, retailers support the EU regulator’s decision because they do not want to be saddled with the fees, and Ian Cheshire, CEO of Kingfisher, explained via e-mail that today’s opinion “is a step towards the establishment of an internal market for payments, which is fair for both the consumers and business. Stimulating competition in the payments services market and ensuring interchange fees will create capital to enable a range of investments to be made.”

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