MasterCard 2010 Annual Report Download - page 139

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued
agreed to make certain modifications to its rules to conform to MasterCard’s existing business practices, and
therefore to specify, among other things, the ways in which merchants may steer customers to preferred payment
forms. The proposed settlement would resolve the DOJ’s investigation, and all ten State Attorneys General have
closed their investigations of MasterCard. The parties are currently awaiting court approval of the settlement.
European Union. In September 2003, the European Commission issued a Statement of Objections
challenging MasterCard Europe’s cross-border default interchange fees. In June 2006, the European Commission
issued a supplemental Statement of Objections covering credit, debit and commercial card fees. In November
2006, the European Commission held hearings on MasterCard Europe’s cross-border default interchange fees. In
March 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 in December 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 $0.5 million U.S. per day) in the event that MasterCard fails to comply. In March
2008, MasterCard filed an application for annulment of the European Commission’s decision with the General
Court of the European Union.
The December 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
about, among other things, the nature of the empirical proof it would require for MasterCard to establish other
default cross-border interchange fees consistent with the decision and so as to understand more fully the
European Commission’s position as to how it may comply with the decision. MasterCard requested an extension
of time to comply with the decision and, in April 2008, the European Commission informed MasterCard that it
had rejected such request. In June 2008, MasterCard announced that, effective June 21, 2008, MasterCard would
temporarily repeal its then current default intra-EEA cross-border consumer card interchange fees in conformity
with the decision. In October 2008, MasterCard received an information request from the European Commission
in connection with the decision concerning certain pricing changes that MasterCard implemented as of
October 1, 2008. MasterCard submitted its response in November 2008.
In March 2009, MasterCard gave certain undertakings to the European Commission and, in response, in
April 2009, the Commissioner for competition policy and DG Competition informed MasterCard that, subject to
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