On 11 September 2014, the European Court of Justice (ECJ) dismissed the appeal by MasterCard and cross-appeals by Royal Bank of Scotland and Lloyds Banking Group, challenging the General Court judgment that upheld the EC's 2007 decision finding that MasterCard's European Economic Area (EEA) fall-back multilateral interchange fees (MIF) breached Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). The ECJ first held that the General Court had been correct to find that, despite a structural change, MasterCard's decisions setting the MIF were decisions of an association of undertakings due to the commonality of interests between MasterCard (and its shareholders) and the member banks.

The ECJ also found that the General Court had applied the correct legal test in examining whether the MIF were ancillary to the MasterCard system. The MIF was not objectively necessary as the MasterCard system was still capable of functioning without it. The ECJ, therefore, upheld the General Court's analysis of the restrictive effects of the MIF, as well as its consideration of the application of Article 101(3).

What this means for you

Our Competition team have published a legal briefing regarding the ECJ’s decision.

The assessment upheld by the ECJ forms the basis of the EC's on-going investigations into MasterCard's MIFs applicable to inter-regional transactions and MIFs applicable to cross-border acquiring. The judgment is also likely to have a bearing on other competition proceedings in the EU against MasterCard (and also against Visa MIFs). Several court appeals in France, Italy and Hungary have been stayed awaiting this judgment. In the UK an investigation by the Competition and Markets Authority has been on hold pending the ECJ's judgment. In Germany, Cyprus, and Hungary there are on-going investigations by the national authorities. The judgment will indirectly also have a bearing on actions for damages launched against MasterCard in the UK.

In addition, MasterCard will now have to look at whether it will adopt a voluntary reduction in interchange rates, potentially creating further difficulties to an industry that is already looking to deal with the Visa commitments.