Mastercard has been accused of offering lower interchange rates to retailers that agreed to handle dual-network debit card payments through the Mastercard network rather than through other networks such as Eftpos.
The Australian Competition and Consumer Commission (ACCC) has filed a lawsuit in Federal Court against Mastercard Asia Pacific and Mastercard Australia for allegedly engaging in anti-competitive behavior in the provision of debit card acceptance services.
According to the consumer watchdog, Mastercard had a “substantial degree of power” in the market for credit card acceptance services under the Reserve Bank of Australia’s (RBA) least-cost routing initiative from November 2017 to at least November 2020.
The least-cost routing initiative aimed to give merchants the option of choosing which debit card network processed their contactless dual-network debit card payments, whether it was Mastercard, Visa, or Eftpos, and was designed to increase competition in the supply of debit card acceptance services while lowering payment processing costs for businesses.
The costs a business pays for dual-network debit card payments can vary depending on which debit card network is utilised to process the transaction.
According to the ACCC, Mastercard entered into agreements with more than 20 major retailers, including supermarkets, fast food chains, and clothing retailers, to offer lower 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, despite the fact that Eftpos was often the lowest cost provider.
“We allege that Mastercard possessed significant market power in the supply of credit card acceptance services and that a significant purpose of Mastercard’s conduct was to stifle competition by discouraging businesses from using Eftpos for debit transaction processing,” ACCC chair Gina Cass-Gottlieb said.
“We are concerned that Mastercard’s alleged conduct resulted in businesses not receiving the full benefit of the increased competition that the least cost routing initiative was supposed to bring.”
The ACCC is seeking declarations, penalties, costs, and other orders at this time.
“Businesses can provide better prices to their clients by lowering their costs. It is critical for both businesses and their customers that the major card schemes, Mastercard, Visa, and Eftpos, compete actively “Cass-Gottlieb stated the following.
After Visa was accused of taking similar actions and offering certain merchants lower interchange rates if they agreed to process Visa-branded dual-network debit card payments through the Visa network rather than others, such as Eftpos, the ACCC accepted a court-enforceable undertaking from the company in March 2021.
Mastercard isn’t the only financial services company in serious water right now.
Mastercard isn’t the only financial services company in serious water right now. The Australian Securities and Investments Commission (ASIC) announced on Monday that it has filed civil penalty proceedings in the Federal Court against Australia and New Zealand Banking Group (ANZ) for allegedly overstating the amount of available funds and balances on customers’ credit card accounts, and then charging fees and interest to customers who used this information to make withdrawals.
According to ASIC, the alleged misconduct stems from “system errors” that led customers to believe their credit card balance and available funds were in credit between May 2016 and September 2021, and that the balance would be available to withdraw without incurring fees or interest starting in September 2021.
