MasterCard Pleased that CAT Quashes OFT Decision

Waterloo, Belgium and London, United Kingdom , 2006-06-20

MasterCard said today that it is pleased that the Competition Appeal Tribunal (CAT) has quashed the UK Office of Fair Trading's (OFT) September 2005 Decision in which the OFT claimed that MasterCard's pre-November 2004 UK credit card interchange fees violated EU and UK competition law. The CAT took this action after the OFT sought to withdraw its Decision.

Commenting on the CAT's action, MasterCard General Counsel Noah J. Hanft said: 


    "We applaud the CAT's action to quash the OFT Decision, rendering

    it a nullity - without force or effect. MasterCard has always

    maintained that these interchange fees, and the manner in which

    they were established, were entirely lawful because, among other

    things, they enabled MasterCard's credit card business in the UK

    to compete effectively with other payment providers. MasterCard

    believes that the OFT's unprecedented action of abandoning a case

    after having issued a negative decision is testament to the

    strength of MasterCard's position.



    "While we are pleased that the OFT has finally walked away from

    what was an ill-considered case, it is unfortunate that it took

    the OFT nearly six years to realize the weakness of its case and

    recognise the strength of MasterCard's arguments. MasterCard has,

    therefore, asked the CAT to award it costs in connection with the

    appeal.



    "Above all, we're pleased by the CAT's action because it means

    that we and, importantly, our customer banks, can focus on the

    business of providing cardholders and merchants in the UK with the

    payment products and services that they most need."


Hanft noted that, over the course of the now concluded appeal, the OFT had already abandoned important parts of its September 2005 Decision. In particular, while consistently maintaining that it believes MasterCard interchange fees are too high, the OFT had acknowledged that it is necessary for a four-party payment system operating with an "honour all cards" rule to establish default terms of reference between card issuers and merchant acquirers.

Interchange fees are critical to the ability of four-party payment systems, like MasterCard, to operate in an efficient and competitive manner, since they allow the cost of providing payment services to be recovered in a manner that maximizes the demand for the services. This is good for both cardholders and merchants since cardholders benefit when more merchants accept MasterCard cards and merchants benefit when more cardholders carry and use MasterCard cards.

The OFT has told the CAT that it will not initiate further proceedings against the pre-November 2004 MasterCard interchange fees arrangements. The OFT has indicated that it intends to investigate MasterCard's current credit card interchange fees, before deciding what, if any, action to take. MasterCard believes that any further proceedings would be fruitless.

Hanft explained that prior to November 2004, MasterCard's UK credit card interchange fees were established by MasterCard UK Members Forum Limited, which includes most of MasterCard's UK customer banks, but since then, MasterCard management has established its UK credit card interchange fees independently of its customer banks. In addition, in May 2006, MasterCard became a publicly traded company in which directors, unaffiliated with banks and elected by public shareholders, represent a majority of its board of directors. Therefore, one of the grounds on which the OFT challenged MasterCard's pre-November 2004 interchange fees - that they were set collectively by banks - is clearly no longer the case.

About MasterCard International

MasterCard International advances global commerce by providing a critical link between financial institutions and millions of businesses, cardholders and merchants worldwide. Through the company's roles as a franchisor, processor and advisor, MasterCard develops and markets secure, convenient and rewarding payment solutions, seamlessly processes more than 16 billion payments each year, and provides industry-leading analysis and consulting services that drive business growth for its banking customers and merchants. With more than one billion cards issued through its family of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard serves consumers and businesses in more than 210 countries and territories, and is a partner to 25,000 of the world's leading financial institutions. No payment card is more widely accepted than MasterCard, which is accepted at more than 24 million merchant locations worldwide. For more information go to www.mastercardinternational.com.

Contact

CONTACT: MasterCard Europe Louise Herbert +32 (0)2 352 5647 [email protected] , ,

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