Australian Watchdog Sues Mastercard for Allegedly Misusing Card Payment Market Power

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As a result of allegations that Mastercard Asia Pacific and Mastercard Australia engaged in anti-competitive behavior that significantly reduced competition in debit card acceptance services, the ACCC has filed a lawsuit in the Federal Court against the two credit card companies.

Mastercard had a “significant degree of leverage” in the market for the delivery of credit card acceptance services under the Reserve Bank of Australia’s (RBA) least-cost routing program, according to the consumer watchdog, between November 2017 and at least November 2020.

As part of the least-cost routing initiative, companies could choose which debit card network processed their contactless dual-network debit card payments, whether Mastercard, Visa, or Eftpos.

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The goal was to increase competition in the supply of debit card acceptance services while reducing payment costs associated with processing debit card payments for businesses.

Different networks charge different costs for processing dual-network debit card payments.

In response to the least-cost routing initiative, Mastercard allegedly 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, even though Eftpos was often the lowest cost provider.

When it comes to credit card acceptance services, Mastercard has “considerable market strength,” according to the chairwoman of the ACCC. “We argue, however, that Mastercard’s conduct had a substantial purpose of preventing businesses from adopting Eftpos to process debit transactions.”

In our view, Mastercard’s alleged actions have prevented businesses from reaping the benefits of increased competition that the least cost routing program was supposed to bring about.

It is time for the ACCC to seek declarations and other orders.

“Businesses can provide better prices to their clients if they reduce their costs. For the benefit of both businesses and customers, Mastercard, Visa, and Eftpos all must compete actively. “Cass-Gottlieb stated this.

As a result of allegations, Visa had taken similar actions and offered lower interchange rates to specific merchants if they agreed to process Visa-branded dual-network debit card payments through the Visa network rather than other networks, such as Eftpos; the ACCC accepted a court-enforceable undertaking from the company in March 2021.

Mastercard isn’t the only financial services company now under scrutiny. When it was announced on Monday that civil penalty proceedings had been initiated against Australia and New Zealand Banking Group (ANZ) because of the alleged overstatement of available funds and balances on customers’ credit card accounts, ASIC said it was charging fees and interest to customers who used this information when making withdrawals.

Apparently, from May 2016 and September 2021, clients were led to believe their credit card balances and available cash were in credit by “system errors,” From September 2021 on, they believed that the balance would be accessible to withdraw without incurring fees or interest.