MasterCard 2009 Annual Report Download - page 134

Download and view the complete annual report

Please find page 134 of the 2009 MasterCard annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
rules. On July 24, 2002, the European Commission announced its decision to exempt the Visa interchange fees
from these rules through the end of 2007 based on certain changes proposed by Visa to its interchange fees.
Among other things, in connection with the exemption order, Visa agreed to adopt a cost-based methodology for
calculating its interchange fees similar to the methodology employed by MasterCard, which considers the costs
of certain specified services provided by issuers, and to reduce its interchange rates for debit and credit
transactions to amounts at or below certain specified levels.
On September 25, 2003, the European Commission issued a Statement of Objections challenging
MasterCard Europe’s cross-border default interchange fees. On June 23, 2006, the European Commission issued
a supplemental Statement of Objections covering credit, debit and commercial card fees. On November 14 and
15, 2006, the European Commission held hearings on MasterCard Europe’s cross-border default interchange
fees. On March 23, 2007, the European Commission issued a Letter of Facts, also covering credit, debit and
commercial card fees and discussing its views on the impact of the IPO on the case. MasterCard Europe
responded to the Statements of Objections and Letter of Facts and made presentations on a variety of issues at the
hearings.
The European Commission announced its decision on December 19, 2007. The decision applies to
MasterCard’s default cross-border interchange fees for MasterCard and Maestro branded consumer payment card
transactions in the European Economic Area (“EEA”) (the European Commission refers to these as
“MasterCard’s MIF”), but not to commercial card transactions (the European Commission stated publicly that it
has not yet finished its investigation of commercial card interchange fees). The decision applies to MasterCard’s
MIF for cross-border consumer card payments and to any domestic consumer card transactions that default to
MasterCard’s MIF, of which currently there are none. The decision required MasterCard to stop applying the
MasterCard MIF, to refrain from repeating the conduct, and not apply its then recently adopted (but never
implemented) Maestro SEPA and Intra-Eurozone default interchange fees to debit card payment transactions
within the Eurozone. MasterCard understood that the decision gave MasterCard until June 21, 2008 to comply,
with the possibility that the European Commission could have extended this time at its discretion. The decision
also required MasterCard to issue certain specific notices to financial institutions and other entities that
participate in its MasterCard and Maestro payment systems in the EEA and make certain specific public
announcements regarding the steps it has taken to comply. The decision did not impose a fine on MasterCard, but
provides for a daily penalty of up to 3.5% of MasterCard’s daily consolidated global turnover in the preceding
business year (which MasterCard estimates to be approximately $500 U.S. per day) in the event that MasterCard
fails to comply. On March 1, 2008, MasterCard filed an application for annulment of the European
Commission’s decision with the General Court of the European Union.
On March 26, 2008, the European Commission announced that it has opened formal antitrust proceedings
against, and on April 6, 2009, the European Commission announced that it had issued a Statement of Objections
to, Visa Europe Limited, under Article 81 of the EC Treaty. The proceedings are in relation to Visa’s multilateral
interchange fees for cross-border and certain domestic consumer payment card transactions within the EEA and
Visa’s ‘honor all cards’ rule as it applies to these transactions.
The December 19, 2007 decision against MasterCard permits MasterCard to establish other default cross-
border interchange fees for MasterCard and Maestro branded consumer payment card transactions in the EEA if
MasterCard can demonstrate by empirical proof to the European Commission’s satisfaction that the new
interchange fees create efficiencies that outweigh the restriction of competition alleged by the European
Commission, that consumers get a fair share of the benefits of the new interchange fees, that there are no less
restrictive means of achieving the efficiencies of MasterCard’s payment systems, and that competition is not
eliminated altogether. In March 2008, MasterCard entered into discussions with the European Commission
124