Mastercard is facing a drawn out legal battle over alleged anti-competitive pricing activity in the card payments market after the Australian Competition and Consumer Commission launched an civil action against the global giant in the Federal Court.
In a statement of claim filed on Monday, the competition regulator alleges Mastercard negotiated strategic agreements that gave 20 large Australian retailers discounts on fees for accepting credit card payments if they routed all or most of their debit card transactions through its processing platform.
The ACCC argues that Mastercard’s action constituted “a misuse of its market power” because the company had allegedly sought to leverage its influence as a credit card provider to reduce or avoid competition in the debit card processing market.
The regulator claims that the payments company began misusing its market power in 2017 when the Reserve Bank was urging banks to expedite the rollout of so-called “least cost routing” services for debit cards.
Least cost routing is a service that enables retailers – rather than banks - to select a payments network to process debit card transactions.
As a payments practice, least cost routing is designed to widen competition in the debit card market by giving merchants the power to bypass the Mastercard and Visa systems and direct transactions to Eftpos Payments Australia.
The ACCC alleges that Mastercard’s strategic agreements with the country’s largest retailers meant that these businesses would not process significant debit card volumes through the Eftpos network even though it was often the lowest cost provider.
“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.
“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.
“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.
A Mastercard spokesperson said the company was reviewing the content of the ACCC’s proceedings.
“We are reviewing the proceedings filed by the ACCC this morning and are disappointed that this has reached the point of litigation,” the spokesperson said.
“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.”
Cass-Gottlieb said that anti-competitive conduct in the financial services industry and the payments sector was a priority for the regulator.
“Financial service providers should be on notice that we will not hesitate to take action in response to concerns raised about anti-competitive conduct in this important sector of Australia’s economy,” she said.
“This case also demonstrates the ACCC’s heightened interest in addressing competitive harm caused by exclusive arrangements engaged in by firms with market power.”
The legal action against Mastercard follows the imposition in March last year of court-enforceable undertakings on rival payments company, Visa.
In that matter the ACCC was concerned that Visa was also using credit card processing discounts to tie retailers to its debit network.
“The ACCC was concerned that Visa’s dealings with merchants could influence their choice of debit card network, and diminish competition between Visa and Eftpos in relation to debit card acceptance,” former ACCC chair Rod Sims said at the time.