Mastercard finds itself in the dock with the Australian Competition and Consumer Commission (ACCC) which has launched an civil action over alleged anti-competitive pricing activity in the card payments market.
ACCC sues Mastercard for anti-competitive pricing
In a statement filed on 30th May 2022, 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 Mastercard 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 local network.
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 Gina Cass-Gottlieb, ACCC chair.
“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.”
“We are reviewing the proceedings filed by the ACCC this morning and are disappointed that this has reached the point of litigation,” a Mastercard spokesperson said.
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