Mastercard is facing an anti-competition probe in one of its biggest markets – Australia. The Australian Competition and Consumer Commission (ACCC) on Monday started legal proceedings in the Federal Court against the payment giant for allegedly stifling competition in the supply of debit card acceptance services.
Australia’s consumer watchdog is suing Mastercard over alleged anti-competitive conduct in deals with large retailers.
The ACCC said in a statement that it has instituted proceedings against Mastercard Asia/Pacific Pte Ltd and Mastercard Asia/Pacific (Australia) Pty Ltd, over alleged misconduct that started half a decade ago in the context of the Reserve Bank of Australia’s least cost routing initiative.
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Mastercard’s alleged anti-competitive conduct commenced in late 2017 in the context of the Reserve Bank of Australia’s the ACCC said the “least cost routing” initiative was aimed to increase competition in the supply of debit card acceptance services and reduce payment costs for businesses by allowing them to choose the lowest cost network to process their transactions.
The aim is to increase competition in debit card acceptance services and reduce payment costs for businesses by allowing them to choose whether debit transactions were processed by Visa, Mastercard or eftpos, with eftpos often being the cheapest option.
“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,” said ACCC Chair Gina Cass-Gottlieb.
In response to the “least cost routing” initiative, Mastercard allegedly entered into agreements with more than 20 major retail businesses, including supermarkets, fast food chains and clothing retailers.
The agreements gave these businesses discounted rates for Mastercard credit card transactions, provided they committed to processing all or most of their Mastercard-eftpos debit card transactions through Mastercard rather than the eftpos network, said the consumer watchdog.
This meant that these businesses would not process significant debit card volumes through the eftpos network even though eftpos was often the lowest cost provider.
“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,” said Cass-Gottlieb.
The ACCC investigated allegations that Mastercard engaged in anti-competitive conduct by offering certain large merchants cheaper interchange rates (known as ‘strategic merchant rates’), for processing credit card payments if they agreed to process Mastercard-eftpos debit card payments through the Mastercard network.
A Mastercard Australia spokesperson said it is disappointed that the ACCC has gone to litigation and is reviewing what it has filed.
“We have cooperated with the ACCC throughout its investigation and will continue to engage with the Commission, defending our actions to innovate and compete in Australia’s payments market,” the spokesperson said in a statement.
The ACCC is 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.