MasterCard Inc.'s fight with the European Union over curbs on transaction fees suffered a blow after an adviser to the bloc's top court backed regulators who capped its rates on cross-border credit-card payments.
Advocate General Paolo Mengozzi of the EU Court of Justice said in a non-binding opinion today that the court should "dismiss the appeal." The Luxembourg-based tribunal follows such advice in a majority of cases.
MasterCard is challenging an EU decision that forces it to maintain reduced rates for the transaction fees that are paid by retailers. EU regulators have targeted credit- and debit-card fees for more than a decade and last year started a probe into Purchase, N.Y.-based MasterCard's charges on foreign card payments such as when tourists go shopping in the 28-nation bloc.
"The consumer that's you and me will be the big loser if this opinion is followed by the court," Javier Perez, president of MasterCard Europe, said in an e-mailed statement. "Practical experience in countries such as Spain, Australia and the U.S. shows that capping interchange shifts the costs for transactions from retailers onto consumers."
The EU General Court, the bloc's second-highest tribunal, previously backed the 2007 decision by the European Commission, the EU's antitrust regulator, that said MasterCard levied unfairly inflated transaction fees paid by retailers for processing payments.
Retailers who back the EU regulator's decision are faced with the fees, known as interchange, to process debit- and credit-card payments. The amounts are set by MasterCard and Visa Europe Ltd., which own the payment networks and pass the money to the banks.
Today's opinion "is a step towards the establishment of an internal market for payments which is fair for both the consumers and business," Ian Cheshire, chief executive officer of Kingfisher Plc, Europe's largest home-improvement retailer, said in an e-mailed statement. "Stimulating competition in the payment services market and ensuring fair interchange fees will create capital to enable a range of investments to be made."
Visa Europe, operator of the EU's largest payment-card network, last year proposed a settlement of a similar case to today's that is being reviewed by the European Commission. The EU last year unveiled plans to cut fees by 6 billion euros ($8.2 billion) a year, by capping interchange fees at 0.2 percent for debit-card payments and 0.3 percent for credit cards.
While MasterCard agreed in 2009 to fee changes as part of a settlement with the Brussels-based EU regulator to avoid a daily penalty of as much as 3.5 percent of sales, it asked the court to overturn the EU antitrust watchdog's findings.
MasterCard's appeal is supported by HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, the U.K.'s biggest mortgage lender.
The top court's rulings usually follow opinions within six months.
The case is: C-382/12 P MasterCard and Others v. Commission.