John Durie: ACCC takes Mastercard to court over card payment agreements with retailers

The Australian Competition and Consumer Commission (ACCC) has lodged a Federal Court case against payments giant Mastercard for alleged anti-competitive behaviour over card payments, backing a key small business fight with big providers Visa and Mastercard to get lower cost services.

The case alleged that after the Reserve Bank of Australia changed the rules in 2017 to demand so-called least cost routing, Mastercard did deals with the major retailers in an attempt to sidestep the new rules.

Least cost routing was aimed at ensuring transactions went to the cheapest payments service route.

The ACCC case alleges the deals included lower debit card fees so long as all payments went through the Mastercard system under the threat of higher credit card charges if the debit card services were routed to rival eftpos.

Eftpos is owned by the big banks, Coles, Woolworths and others.

Least cost routing is a key campaign platform for the Council of Small Business Organisations Australia (COSBOA) because it delivers cheaper transaction fees for small retailers.

The RBA’s least cost routing initiative aimed to increase competition in the supply of debit card acceptance services and reduce payment costs for businesses by allowing them to choose the lowest cost network to process their transactions, the ACCC said.

This enabled businesses to choose whether their debit transactions were processed by Visa, Mastercard or eftpos, with eftpos often being the cheapest option.

It is alleged that in response to the least cost routing initiative, Mastercard entered into agreements with more than 20 major retail businesses, including supermarkets, fast food chains and clothing retailers.

“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,” the ACCC said in a statement.

“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.”

“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.

“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.

“Reducing costs for businesses enables them to offer their customers better prices. Making sure the major card schemes, Mastercard, Visa and eftpos, compete vigorously is important for both those businesses and their customers,” Ms Cass-Gottlieb said.

“This case also demonstrates the ACCC’s heightened interest in addressing competitive harm caused by exclusive arrangements engaged in by firms with market power.”

The ACCC action follows undertakings given by Visa last year and is under sections 46 and 47 of its act which covers abuse of market power.