The Australian Competition and Consumer Commission (ACCC) has instituted proceedings in the Federal Court against Mastercard. The watchdog is alleging Mastercard engaged in anti-competitive conduct.
Specifically, the ACCC is alleging Mastercard engaged in conduct with the purpose of substantially lessening competition in the supply of debit card acceptance services.
Mastercard’s alleged anti-competitive conduct, the ACCC said, commenced in late 2017 in the context of the Reserve Bank of Australia’s least cost routing initiative.
Least cost what now? Least cost routing (or LCR) is an initiative aimed at promoting competition in the debit card market and helping to reduce payment costs in the economy. The initiative from the RBA aimed to allow businesses to choose the lowest cost network to process their transactions.
This enabled businesses to choose whether their debit transactions were processed by Visa, Mastercard or Eftpos, with Eftpos often being the cheapest option.
But the ACCC is alleging that in response to the LCR initiative, Mastercard entered into agreements with more than 20 major retail businesses, including supermarkets, fast food chains and clothing retailers. The watchdog said the agreements gave these businesses discounted rates for Mastercard credit card transactions, provided they committed to processing all or most of their Mastercard-Eftpos debit card transactions through Mastercard rather than the Eftpos network.
This meant that these businesses would not process significant debit card volumes through the Eftpos network even though Eftpos was often the lowest cost provider, the ACCC explained.
“We allege that Mastercard had substantial power in the market for the supply of credit card acceptance services, and that a substantial purpose of Mastercard’s conduct was to hinder the competitive process by deterring businesses from using Eftpos for processing debit transactions,” ACCC chair Gina Cass-Gottlieb said in a statement on Monday.
“We are concerned that Mastercard’s alleged conduct meant that businesses did not receive the full benefit of the increased competition that was intended to flow from the least cost routing initiative.”
Cass-Gottlieb said financial service providers should be on notice that the ACCC will not hesitate to take action in response to concerns raised about anti-competitive conduct in the sector.