The ACCC vs Mastercard: A Look at the Debit Card Processing Market
The Australian Competition and Consumer Commission (ACCC) has brought a civil action against Mastercard, a global leader in the credit card industry. The regulator alleges that Mastercard misused its market power, leveraging its position as a credit card provider to reduce competition in the debit card processing market. This case, which is expected to run for six weeks, is revealing the complex dynamics of the payments industry and the struggles smaller players face in breaking into the market.
Mastercard’s Alleged Market Misuse
According to the ACCC, Mastercard negotiated strategic agreements in 2017 that offered discounts on fees for accepting credit card payments to 20 large Australian retailers. However, these discounts were conditional on the retailers routing most, if not all, of their debit card transactions through Mastercard’s processing platform. This action, the ACCC argues, was a misuse of market power as it undermined competition in the debit card processing market at a time when the Reserve Bank was encouraging banks to speed up the rollout of “least cost routing” services for debit cards.
The Eftpos Struggle
Former interim CEO of Eftpos Payments Australia Ltd, Paul Jennings, testified that the company was in a difficult financial situation about a decade ago. To survive and grow, Eftpos increased its volumes by 29% by introducing “merchant routing”, another term for least cost routing. Despite this, Eftpos faced an uphill battle in a market dominated by giants like Mastercard and Visa.
Jennings revealed that during his tenure as interim CEO in 2017, he attempted to negotiate a partnership with Discover. Similarly, his successor, Stephen Benton, proposed a tie-up with China Union Pay. However, these plans did not materialize as all Australian banks and card issuers were already linked with either Mastercard or Visa. The major banks, especially, showed no interest in associating with another international card scheme.
Mastercard’s Court Battle
On the legal front, Mastercard has not escaped scrutiny. In a recent ruling, the Full Court of the Federal Court upheld an earlier decision that required Mastercard to produce certain documents it claimed were confidential and subject to legal professional privilege. Mastercard’s appeal against this decision was rejected. The court ruled that Mastercard inadvertently waived its privilege when it included certain paragraphs in its affidavits.
Mastercard’s legal struggle and the allegations of market misuse highlight the challenges that smaller players like Eftpos face in the payments industry. As the case continues, it will be interesting to see how it impacts the dynamics of the Australian debit card processing market and whether it paves the way for increased competition.
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