MasterCard 2010 Annual Report Download - page 141

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued
Shortly thereafter, the OFT commenced a new investigation of MasterCard’s current U.K. default credit
card interchange fees and announced in February 2007 that the investigation would also cover so-called
“immediate debit” cards. To date, the OFT has issued a number of requests for information to MasterCard
Europe and financial institutions that participate in MasterCard’s payment system in the United Kingdom.
MasterCard understands that the OFT is considering whether to commence a formal proceeding through the
issuance of a Statement of Objections. The OFT has informed MasterCard that it does not intend to issue such a
Statement of Objections prior to the judgment of the General Court of the European Union with respect to
MasterCard’s appeal of the December 2007 cross-border interchange fee decision of the European Commission.
If the OFT ultimately determines that any of MasterCard’s U.K. interchange fees contravene U.K. and European
Union competition law, it may issue a new decision and possibly levy fines accruing from the date of its first
decision. MasterCard would likely appeal a negative decision by the OFT in any future proceeding to the
Competition Appeals Tribunal. Such an OFT decision could lead to the filing of private actions against
MasterCard by merchants and/or consumers which, if its appeal of such an OFT decision were to fail, could
result in an award or awards of substantial damages and could have a significant adverse impact on the revenues
of MasterCard International’s U.K. customers and MasterCard’s overall business in the U.K.
Poland. In April 2001, in response to merchant complaints, the Polish Office for Protection of
Competition and Consumers (the “PCA”) initiated an investigation of MasterCard’s domestic credit and debit
card default interchange fees. MasterCard Europe filed several submissions and met with the PCA in connection
with the investigation. In January 2007, the PCA issued a decision that MasterCard’s interchange fees are
unlawful under Polish competition law, and imposed fines on MasterCard’s licensed financial institutions. As
part of this decision, the PCA also decided that MasterCard had not violated the law. MasterCard and the
financial institutions appealed the decision to the court of first instance. In November 2008, the court of first
instance reversed the decision of the PCA and also rejected MasterCard’s appeal on the basis that MasterCard did
not have a legal interest in the PCA’s decision because its conduct was not found to be in breach of the relevant
competition laws. MasterCard has appealed this part of the court of first instance’s decision because it has
significant interest in the outcome of the case. The PCA appealed the other parts of the decision. On April 22,
2010, the court of appeals issued an oral decision (followed by a written decision on May 25, 2010) in which it
reinstated MasterCard’s appeal, reversed a specific finding of the court of first instance and sent the case back to
the court of first instance for further proceedings. If on appeal the PCA’s decision is ultimately allowed to stand,
it could have a significant adverse impact on the revenues of MasterCard’s Polish customers and on
MasterCard’s overall business in Poland.
Hungary. In January 2008, the Hungarian Competition Authority (“HCA”) notified MasterCard that it had
commenced a formal investigation of MasterCard Europe’s domestic interchange fees. This followed an informal
investigation that the HCA had been conducting since the middle of 2007. In July 2009, the HCA issued to
MasterCard a Preliminary Position that MasterCard Europe’s historic domestic interchange fees violate
Hungarian competition law. MasterCard responded to the Preliminary Position both in writing and at a hearing
which was held in September 2009. Subsequently in September 2009, the HCA ruled that MasterCard’s historic
interchange fees violated the law and fined MasterCard Europe approximately $3 million, which was paid during
the fourth quarter of 2009. In December 2009, the HCA issued its formal decision and MasterCard appealed the
decision to the Hungarian courts. On September 24, 2010, the HCA filed its reply to MasterCard’s appeal, while
MasterCard filed its response in October 2010. On October 29, 2010, the Hungarian appeals court stayed the
proceeding until MasterCard’s appeal to the General Court of the European Union of the European
Commission’s December 2007 cross-border interchange fee decision is finally decided. If the HCA’s decision is
not reversed on appeal, it could have a significant adverse impact on the revenues of MasterCard’s Hungarian
customers and on MasterCard’s overall business in Hungary.
Italy. In July 2009, the Italian Competition Authority (“ICA”) commenced a proceeding against
MasterCard and a number of its customers concerning MasterCard Europe’s domestic interchange fees in Italy.
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