By its decision published on 27 February 2014 the Italian Competition Authority (ICA) launched an investigation into Consortium Bancomat (Consortium) targeting its decision to set Multilateral Interchange Fees (MIFs) for bill payment transactions.
The Consortium is an association of undertakings for antitrust purposes, which manages Bancomat and Pagobancomat, Italy’s largest debit card payment circuits. Among its 594 members, the Consortium includes the Italian Banks Association, banks and financial intermediaries and some major non-banking players active in the supply of payment services (for instance Poste Italiane, the Italian postal incumbent operator).
The investigation against the Consortium
Interchange fees are paid by the merchant’s bank to the cardholder’s bank for every individual transaction. The ICA will have to verify whether the Consortium’s decision may amount to an infringement of Article 101 TFEU. In particular, following the Consortium’s decision, as of 3 January 2014 all members have started charging a € 0.10 fee per each bill payment transaction carried out via Pagobancomat card.
The ICA preliminary view is based on the approach taken by the same ICA and the European Commission in the past cases concerning payment cards systems. In particular, the ICA assumes that the existence of uniform MIFs may harm competition between acquiring banks on Pagobancomat circuit, which accounts for 80% of Italy’s debit cards. In the ICA’s view the acquiring banks are somehow prevented from lowering the fee charged to merchants, this resulting in limited room for banks’ price policies and ultimately in increased consumer prices.
The focus on MIFs
It should be noted that European and national antitrust enforcers have focused a great deal of attention on MIFs in payment markets over the past few years. In Italy, in 2009 the ICA has investigated into the payment schemes of one of the largest credit card circuits (i.e. Mastercard) and of the same Consortium’s.
In this respect, in the former 2009 investigation against the Consortium the objections raised by the ICA concerned the payment scheme regulating and fixing maximum MIFs for Pagobancomat transactions carried out through POSs (i.e. Points of Sale). In such a case, the ICA decided to accept the remedies submitted by the Consortium in the light of the overall effects on innovation and efficiency. With regard to the merits of such remedies, in a first place, the Consortium committed to reduce the original cap of € 0.13 per each transaction and bring it down by 4%. In a second place, Consortium undertook to periodically revise the MIFs in the light of the methodology developed in economic literature.
As a result of national and EU investigations into payment card markets, the European Commission found that problematic MIFs should be addressed through a comprehensive EU regulation. Therefore, in July 2013 the Commission submitted to the Council and the Parliament a proposal for EU Regulation that contemplates the introduction of MIF caps for most frequently used cards. In particular, such draft Regulation provides MIF levels based on an estimate of the fee at which a retailer would be indifferent between being paid by card or in cash.
The draft regulation is currently under approval of the EU institutions. After debating on such draft regulation, the European Parliament’s Economic and Monetary Affairs Committee has recently reached consensus on plans to introduce a cap of the lowest of € 0.07 or 0.2% of the value of transactions for debit card payments and 0.3% for credit cards.
In such a context, it should be considered that the European discussion on the adoption of MIFs Regulation may also have a bearing on the outcome of the Consortium proceedings. In fact, the Consortium might try and submit remedies in the next few months proposing to lower the fees in order to meet the caps envisaged in the draft regulation.