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Mastercard Gets fined with $650 Million by European Commission

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The second largest card brand in the European market, Mastercard has been slapped with a whopping 571 million euros or $650 million fine for not abiding antitrust rules. The European Commission has taken actions as the card brand raised payment-processing fees artificially. Due to that, retailers and consumers had to pay higher prices.

Mastercard pushed the acquiring banks to impose the interchange fees of the country where the retailer was located. Also, the regulators at Europe said that the payments & technology firm forced merchants to use banks only in their home countries for processing payments. This has prevented the merchants from buying goods at lower costs with the help of banks in other European countries. In this case, Consumers had to face higher fees which were passed by the retailers.

Additionally, as EU regulatory body stated, Mastercard provided enough co-operation in the investigation so that the actual fine was with a reduction of 10%.

When a consumer purchases products using a credit or debit card, the seller’s bank pays a fee to the cardholder’s bank, which is called as an interchange fee. It gets passed on to the retailer, based on a percentage of a purchase’s sum. Before December 2015, this fees in the EEA differed largely between countries. Then, the EU limited interchange fees at a maximum of 0.2% of total transaction value. If debit and credit cards are used for the transaction, then the limit was at 0.3% of transaction value.

The Regulators formally investigated Mastercard In 2013. The Commission figured out that the company’s rules made both retailers and consumers pay higher fees. On this, Margrethe Vestager, the commissioner in charge of competition policy stated, “European consumers use payment cards every day when they buy food or clothes or make purchases online. By preventing merchants from shopping around for better conditions offered by banks in the other Member States, Mastercard’s rules artificially raised the costs of card payments, harming consumers and retailers in the EU.”

Mastercard has affirmed that the firm has stopped the practice long ago. The company said in a statement, “This decision relates to historic practices only, covers a limited period of time of less than two years and will not require any modification of Mastercard’s current business practices.”

Apart from that, MasterCard shares seem pretty unaffected by the fine, though it dropped by 1.26% to $199.46.

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