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MasterCard Files Appeal of European Commission Decision


MasterCard seeks to annul decision which would harm consumers and undermine European competitiveness and innovation

MasterCard Europe has applied to the European Court of First Instance to annul the European Commissionís decision on MasterCard Europeís cross-border interchange fees, and said it believes it has strong grounds for its request. The December 19, 2007 decision requires the company, among other things, to repeal its intra-EEA fallback interchange fees by June 21.

The company reaffirmed its intention to comply with the Commissionís Order while the appeal proceeds, as well as its commitment to ensuring that its payments services remain competitive and continue to benefit its customers as well as the millions of European cardholders and merchants who rely on MasterCard and Maestro cards.

MasterCard said its concerns with the decision focus on:

* the Commissionís failure to recognize that four-party payment systems cannot operate without default settlement terms between banks that issue cards to consumers and those that acquire transactions for merchants, which requires the setting of an interchange fee;
* the Commissionís refusal to recognize the efficiencies that four-party payment systems create and the fairness of MasterCardís interchange fees; and
* the Commissionís inaccurate conclusion that, despite MasterCardís May 2006 IPO, MasterCard and its customers continue to be ďan association of undertakingsĒ, and its mischaracterization of MasterCardís interchange fees as decisions of an association that restrict competition under EC Treaty rules.

ďMasterCard firmly believes that market forces, not regulation, should drive key decisions such as the setting of interchange fees and retailersí choices over which forms of payment to accept. If left unchallenged, and especially if followed by national regulators, the Commissionís decision would not only be bad news for consumers but a blow to the European payments industry,Ē commented Javier Perez, President of MasterCard Europe.

Perez continued: "From a business point of view, a payment system that does not allow for efficient recovery of costs is not sustainable in the long term, nor is it desirable because it limits the scope for innovation in payment services offered to consumers.

ďThe Single Euro(pean) Payments Area (SEPA) for payment cards, launched at the beginning of the year, will continue to require enormous investment and commitment by market players. Itís difficult to expect them to expand into new markets when regulation lowers the incentive to take those risks. In our view, the best way to proceed for the payments industry and SEPA is to follow the established European public policy principle of relying on competition to deliver what consumers want.Ē


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