|Friday, 31 July 2015 13:47
|MasterCard agrees to US$61m settlement with Tesco
Credit card fees deal part of UK merchant anti-trust case
MasterCard Inc has agreed to pay Tesco Plc $61 million as as part of a multi-billion dollar lawsuit over credit card fees in the UK.
“We have been settling with Tesco, which is the largest merchant claimant in this litigation,” Martina Hund-Mejean, Purchase, New York-based MasterCard’s chief financial officer, said during the company’s earnings call Wednesday. “We are pleased that that is behind us.”
More than 20 UK retailers are suing MasterCard in London over the fees charged by the payments company in transactions using its credit and debit cards. MasterCard has filed responses to the remaining retailers’ claims in court.
Wal-Mart Stores' Asda unit, William Morrison Supermarkets, Arcadia Group, Comet, Iceland and at least six other big nationwide chains have also commenced legal proceedings against Visa over payment-processing fees.
Tesco sued MasterCard in 2014 to “recover the historic overpayment of anti-competitive interchange fees. These proceedings have now been settled and discontinued on mutually acceptable terms,” a spokesperson for Cheshunt, England-based Tesco said in an e-mail.
But the settlement is only part of the story. In addition to the UK lawsuit, the European Union earlier this month sent MasterCard a formal complaint, which could lead to fines, over “artificially high” card-payment fees. The EU’s statement of objections targets measures thwarting cross-border competition among banks that offer card services to retailers as well as excessive fees when foreign visitors go shopping in the 28-nation bloc.
The UK Government has also commenced consultation on interchange fee caps which are set to come into force across the EU at the end of the year.
There were almost 10.7 billion credit and debit transactions in Britain in 2013, and the British Retail Consortium has estimated that the caps could save British businesses up to £480 million a year.
The Government would like to see this benefit passed on to consumers in the form of lower prices.
The card companies have always argued that interchange fees facilitate electronic payments globally by balancing the benefits and costs of the system among its participants. The courts are failing to be convinced.