Australian watchdog sues Mastercard for allegedly misusing card payment market power


The Australian Competition and Consumer Commission (ACCC) has started legal proceedings in the Federal Court against Mastercard Asia Pacific and Mastercard Australia for alleged anti-competitive conduct that substantially lessened competition in the supply of debit card acceptance services.

The consumer watchdog alleges between November 2017 to at least November 2020 that Mastercard had a “substantial degree of power” in the market for the supply of credit card acceptance services under the Reserve Bank of Australia’s (RBA) least-cost routing initiative.

The least-cost routing initiative aimed to give merchants the ability to choose which debit card network processed their contactless dual-network debit card payments — whether that was Mastercard, Visa, or Eftpos — and was intended to increase competition in the supply of debit card acceptance services, while reduce payments costs associated with processing debit card payments for businesses.  

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.

The ACCC alleges that in response the least-cost routing initiative, Mastercard entered into agreements with more than 20 major retailers, including supermarkets, fast food chains, and clothing retailers, to offer cheaper interchange rates for processing credit card payments if they agreed to process Mastercard-Eftpos debit card transactions through the Mastercard network, rather than 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.”

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

“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.

In March 2021, the ACCC accepted a court-enforceable undertaking from Visa after the company was accused of taking similar actions and offering certain merchants cheaper interchange rates if they agreed to process Visa branded dual-network debit card payments through the Visa network rather than other ones, like Eftpos.

Mastercard is not the only financial services business currently in hot water. On Monday, the Australian Securities and Investments Commission (ASIC) said it has commenced civil penalty proceedings in the Federal Court against Australia and New Zealand Banking Group (ANZ) for allegedly overstating how much available funds and balances customers had on their credit card accounts, and charging fees and interest to customers who relied on this information when making withdrawals.

According to ASIC, the alleged misconduct is the result of “system errors” that misled customers between May 2016 and September 2021, and from September 2021 to believe their credit card balance and available funds were in credit, and that the balance would be available to withdraw from without incurring fees or interest.

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