MasterCard 2011 Annual Report Download - page 134

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
November 2004, the OFT issued a third notice (now called a Statement of Objections) claiming that the
interchange fees infringed U.K. and European Union competition law.
In November 2004, MasterCard’s board of directors adopted a resolution withdrawing the authority of the
U.K. members to set domestic MasterCard interchange fees and MSFs and conferring such authority exclusively
on MasterCard’s President and Chief Executive Officer.
In September 2005, the OFT issued its decision, concluding that MasterCard’s U.K. interchange fees that
were established by MMF prior to November 18, 2004 contravene U.K. and European Union competition law.
The OFT decided not to impose penalties on MasterCard or MMF. MMF and MasterCard appealed the OFT’s
decision to the U.K. Competition Appeals Tribunal. In June 2006, the U.K. Competition Appeals Tribunal set
aside the OFT’s decision, following the OFT’s request to the Tribunal to withdraw the decision and end its case
against MasterCard’s U.K. default interchange fees in place prior to November 18, 2004.
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 and
financial institutions that participate in MasterCard’s payment system in the United Kingdom. MasterCard
understood that the OFT was considering whether to commence a formal proceeding through the issuance of a
Statement of Objections. In January 2010, the OFT 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 (and Visa’s) interchange
fees are unlawful under Polish competition law, and imposed fines on MasterCard’s (and Visa’s) licensed
financial institutions. As part of this decision, the PCA also decided that MasterCard (and Visa) 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 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. In April 2010, the court of appeals issued an oral decision (followed by a written decision in
May 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 (and Visa Europe’s) domestic interchange fees. This
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