The Australian watchdog is accusing Mastercard of offering cheaper interchange rates to merchants if they decide to partner with Mastercard compared to others. These deals include processing dual-network debit card payments through the service.
ACCC Files Legal Proceedings Against Microsoft
According to the story by ZDNet, the Australian Competition and Consumer Commission (ACCC) has begun filing legal proceedings against Mastercard Asia Pacific and Mastercard Australia. The proceedings were filed in the Federal Court.
As per the filing, Mastercard was alleged for anti-competitive conduct which resulted in the supply of debit card acceptance services being decreased when it comes to competition. As per the consumer watchdog, Mastercard, from November 2017 to November 2020 at least, had a "substantial degree of power" when it came to the supply of credit card acceptance services.
Reserve Bank of Australia's Least-Cost Routing Initiative
Mastercard's power was allegedly under the least-cost routing initiative by the Reserve Bank of Australia (RBA). The least-cost routing initiative aimed to give merchants the choice between Mastercard, Visa, or Eftpos for their choice of contactless dual-network debit card payments.
This was an attempt to help reduce payment costs for debit card payment processing through the increase of competition. The fees paid by merchants for dual-network debit card payments can vary "depending on the debit card network."
Mastercard Allegedly had Agreements with Over 20 Major Retailers
The allegations by ACCC is that Mastercard had agreements with over 20 major retailers for cheaper interchange rates for payment processing through credit cards in exchange for exclusivity. These included supermarkets, clothing retailers, and fast-food chains.
Mastercard allegedly made the retailers agree to process all Mastercard-Eftpos debit card transactions "through the Mastercard network" and not the Eftpos network despite lower costs being offered by the latter.
Mastercard Allegedly Hindered Businesses from Using Eftpos
Gina Cass-Gottlieb, the ACCC chair, says that Mastercard's moves allegedly hindered businesses from using Eftpos in order to process debit transactions. This meant that the least cost routing initiative wasn't achieved because businesses were not able to receive its full benefit.
The ACCC is looking for "declarations, penalties, costs, and other orders" as also noted by itnews. Cass-Gottlieb stated that the purpose of cost reduction is to allow consumers to enjoy better prices and that competition for major players is beneficial for both businesses and customers.
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Visa was Also Probed by the Australian Watchdog
In March 2021, the ACCC accepted Visa's court-enforceable undertaking for doing similar things as Mastercard. Visa, during that time, offered merchants cheaper interchange rates for an agreed Visa-branded dual-network exclusivity for debit card payments.
The allegations against Mastercard are pointing toward how their practices do not align with the least-cost routing initiative by the RBA. The accusations regarding Mastercard's moves in the market by the ACCC can be found on its official website.
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Written by Urian B.
