MasterCard 2011 Annual Report Download - page 133

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
MasterCard’s fulfilling its undertakings, they do not intend to pursue proceedings for non-compliance with or
circumvention of the decision of December 2007 or for infringing the antitrust laws in relation to the October
2008 pricing changes, the introduction of new cross-border consumer default interchange fees or any of the other
MasterCard undertakings. MasterCard’s undertakings include: (1) repealing the October 2008 pricing changes;
(2) adopting a specific methodology for the setting of cross-border consumer default interchange fees;
(3) establishing new default cross-border consumer card interchange fees as of July 1, 2009 such that the
weighted average interchange fee for credit card transactions does not exceed 30 basis points and for debit card
transactions does not exceed 20 basis points; (4) introducing a new rule prohibiting its acquirers from requiring
merchants to process all of their MasterCard and Maestro transactions with the acquirer; and (5) introducing a
new rule requiring its acquirers to provide merchants with certain pricing information in connection with
MasterCard and Maestro transactions. The undertakings will be effective until a final decision by the General
Court of the European Union regarding MasterCard’s application for annulment of the European Commission’s
December 2007 decision.
The General Court of the European Union held a full day hearing on MasterCard’s appeal of the European
Commission’s decision on July 8, 2011. The hearing completed the General Court’s review of the decision, to be
followed by a judgment to be rendered by the Court and subject to any further appeals.
Although MasterCard believes that any other business practices it would implement in response to the
decision would be in compliance with the December 2007 decision, the European Commission may deem any
such practice not in compliance with the decision, or in violation of European competition law, in which case
MasterCard may be assessed fines for the period that it is not in compliance. Furthermore, because a balancing
mechanism like default cross-border interchange fees constitutes an essential element of MasterCard Europe’s
operations, the December 2007 decision could also significantly impact MasterCard International’s European
customers’ and MasterCard Europe’s business. The European Commission decision could also lead to additional
competition authorities in European Union member states commencing investigations or proceedings regarding
domestic interchange fees or, in certain jurisdictions, regulation. In addition, the European Commission’s
decision could lead to the filing of private actions against MasterCard Europe by merchants and/or consumers
which, if MasterCard is unsuccessful in its application for annulment of the decision, could result in MasterCard
owing substantial damages.
United Kingdom. In September 2001, the Office of Fair Trading of the United Kingdom (“OFT”) issued a
Rule 14 Notice under the U.K. Competition Act 1998 challenging the MasterCard default interchange fees and
multilateral service fee (“MSF”), the fee paid by issuers to acquirers when a customer uses a MasterCard-
branded card in the United Kingdom either at an ATM or over the counter to obtain a cash advance. Until
November 2004, the interchange fees and MSF were established by MasterCard U.K. Members Forum Limited
(“MMF”) (formerly MasterCard Europay U.K. Ltd.) for domestic credit card transactions in the United
Kingdom. The notice contained preliminary conclusions to the effect that the MasterCard U.K. default
interchange fees and MSF infringed U.K. competition law and did not qualify for an exemption in their present
forms. In February 2003, the OFT issued a supplemental Rule 14 Notice, which also contained preliminary
conclusions challenging MasterCard’s U.K. interchange fees (but not the MSF) under the Competition Act. In
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