MasterCard is an American multinational dwelling into the global delivery of financial services. As correctly put on its website, it is the leading global payments and technology company that connects consumers, businesses, merchants, issuers and governments around the world. MasterCard has its consistent presence in the UK offering relevant financial exchange services to both large businesses and small consumers positioned at the end of the chain. The significance of this activity is to analyze critically the current situation and the genesis of the legal problems being faced by MasterCard International in the UK. The main issue in contention revolves around the interchange fee that MasterCard has been imposing on UK users regarding debit and credit card charges.
According to Croft from the Financial Times, MasterCard is facing one of the first class lawsuit actions in the UK. The basis of the current claim is that the company had been, for a long time imposing unfair rates of interchange fees on users of its services within the UK. The complexity of the matter is the fact that the companys actions affected all people (those who were directly affiliated with their services and the average consumers who knew nothing about MasterCard financial services). As the claimant indicates, the average commodity prices in the UK from 1992 to 2008 were higher than normal due to the unlawful doing of MasterCard. By imposing higher interchange fees on the large retailers in the country, businesses had no alternative but to hike prices and pass down the costs to the consumers. Despite being evident that all MasterCard holders in the UK were treated unfairly by the company, the isolated incident was the unexpected impact it had on all consumers, including people who opted for direct cash purchasing. Given the expansive scope of the legal problem MasterCard is facing, analysts are holding up for a 19 billion lawsuit, the largest in the country.
The current source of MasterCards lawsuit is directly linked to one of its recent battles with the European Commission (EC) regarding the anticompetitive cross-border interchange fees imposed by the company. The EC has strong regulations regarding fair competition between major and minor companies in the region. With MasterCard, the issue of contention revolved around the Multilateral Interchange Fees (MIFs), which are charges imposed to the merchants bank by the cardholders bank. The MIFs play a significant part in determining the interchange fee, which ultimately is passed on to the consumer. In its lawsuit against the EC, MasterCard was found to have violated Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) by prohibiting fair competition. While Article 101(3) of the same treaty provides room for exemption, a significant feature is that the exception must hold any positive or other beneficial attributes to the consumer. Failure to that like in the case of MasterCard, the exemption offer is taken out of the table.
Financial sources point out MasterCards violation of the EC cross-border interchange fee to be the red alert of the slowly brewing lawsuit in the UK. Under the Consumers Rights Act of 2015, class action lawsuits have become a reality in the UK. Major consumer rights were violated by the MasterCards decision to impose high interchange fees that eventually affected the cost of doing business and commodity prices in general. The Consumer Act of 2015 came in place to replace the Supply of Goods and Services Act of 1982, which was slightly inefficient to handle the current illegal undertakings presented by MasterCard and the Competition Act of 1998. It is a shared understanding that businesses are there to make profits, however, using unlawful mechanisms remains unacceptable both from a legal and moral perspective. MasterCard may have negatively affected many consumers but the repercussions of its actions at that particular time are catching up under the revised legal regime.
Besides the violation of the European Unions competition laws, major retailers in the UK such as Tesco have also had legal battles with MasterCard on the same subject issue of putting in place high interchange fees. Considering other economic conditions, the high debit/credit card transaction fees pushed prices high making it tough for both retailers and consumers. In 2015, MasterCard paid Tesco $61 million as a settlement of Tescos anti-competitive lawsuit. Tesco was only one of the 20 retailers who sued the company for interchange fees that prohibited fair competition. While Tescos settlement was minute compared to the settlement US retailers secured, the current boiling lawsuit is set to be the biggest one yet.
In summary, it is clear to point out that MasterCard violated the provisions of the recently upgraded Consumer Rights Act of 2015. Much of the past lawsuits have been paving a way for the current one which involves a majority of consumers in the country. The violation of the ECs competition laws and the spirited legal battles that have been orchestrated by UK retailers are all signs of wrongdoing by the giant financial service provider. As per the claimants indication, the aim is to make sure that the company does not keep all the profits it acquired illegally from the year 1992 to 2008.
Supply of Goods and Services Act 1982. <http://www.legislation.gov.uk/ukpga/1982/29> Accessed on 05 August 2016.
Collinson, Patrick, Retailers v MasterCard and Visa in battle of the fees The Guardian (London, 25 May 2013) <https://www.theguardian.com/money/blog/2013/may/25/retailers-mastercard-visa-fees> Accessed 05 August 2016.
Croft, Jane, MasterCard faces one of the of the UKs first class action lawsuits Financial Times (05 July 2016) < https://next.ft.com/content/6f0fdb5c-42ce-11e6-9b66-0712b3873ae1> Accessed on 05 August 2016.
EUR-Lex, Access to European Union Law- Article 101 < http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:12008E101> Accessed 05 August 2016.
European Competition, Competition < http://ec.europa.eu/competition/sectors/financial_services/enforcement_en.html> Accessed from 05 August 2016.
Finextra, MasterCard faces 19 billion UK interchange Suit (06 July 2016) <https://www.finextra.com/newsarticle/29134/mastercard-faces-19-billion-uk-interchange-suit> Accessed 05 August 2016.
Finextra. MasterCard pays out $61 million to settle Tesco interchange suit (31 July 2015) < https://www.finextra.com/news/fullstory.aspx?newsitemid=27667> Accessed 05 August 2016.
Gual, Jordi, and Nuria Mas, European Commission decisions on anti-competitive behavior. (IESE Business School. Working Paper WP-846 (2010) 1-28.
Legislation.gov.uk, Consumer Rights Act 2015 < http://www.legislation.gov.uk/ukpga/2015/15/contents/enacted> Accessed 05 August 2015.
MasterCard, About MasterCard < https://www.mastercard.us/en-us/about-mastercard.html> Accessed 05 August 2016.
Parker, David, Reforming competition law in the UK: the Competition Act 1998 (Aston Business School Research Institute, 2000) 1-25.
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