MasterCard 2013 Annual Report Download - page 101

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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damages in unspecified amounts, as well as injunctive relief, interest and legal costs. In April 2012, the Quebec suit
was amended to include the same defendants and similar claims as in the British Columbia and Ontario suits. With
respect to the status of the proceedings: (1) the Quebec suit has been stayed, (2) the Ontario suit is being temporarily
suspended while the British Columbia suit proceeds, and (3) the British Columbia court held a class certification hearing
in April 2013. Additional complaints styled as class actions have been filed in Saskatchewan and Alberta. The claims
in these complaints largely mirror the claims in the British Columbia and Ontario suits. If the class action lawsuits are
ultimately successful, negative decisions could have a significant adverse impact on the revenue of MasterCard’s
Canadian customers and on MasterCard's overall business in Canada and could result in substantial damage awards.
European Union. In September 2003, the European Commission issued a Statement of Objections challenging
MasterCard Europe’s cross-border default interchange fees and, in June 2006, it issued a supplemental Statement of
Objections covering credit, debit and commercial card fees. In December 2007, the European Commission announced
a decision that 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 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. 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 $0.8 million per day) in the event that MasterCard fails to comply. To date, MasterCard has not been
assessed any such penalty. In March 2008, MasterCard filed an application for annulment of the European Commission’s
decision with the General Court of the European Union.
Following discussions with the European Commission, MasterCard announced that, effective in June 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 2008. In
March 2009, MasterCard gave certain undertakings to the European Commission and, in response, in April 2009, the
Commissioner for competition policy and the Directorate-General for 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 December 2007 decision 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 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 were effective until
the General Court of the European Union issued a judgment in May 2012.
In May 2012, the General Court of the European Union issued a judgment dismissing the Company’s appeal and
upholding the European Commission’s decision. In August 2012, the Company appealed the judgment to the European
Union Court of Justice (the “ECJ”). The Advocate General to the ECJ issued a non-binding opinion in January 2014
recommending that the ECJ reject MasterCard’s appeal. Historically, in a majority of cases, the ECJ has followed the
Advocate General’s opinions. MasterCard anticipates that the ECJ will issue its final decision sometime in 2014.
Should the ECJ ultimately reject MasterCard’s appeal, the European Commission’s December 2007 decision will be
upheld. Although the interim agreement with the European Commission, by its terms, formally ended on the day of
the General Court’s judgment, MasterCard intends to act consistent with the terms of the agreement.