MA MasterCard Incorporated

By Allison Prang 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 5, 2018).

European Union regulators said Tuesday Mastercard Inc. and Visa Inc. have agreed to lower fees assessed to merchants when they accept debit or credit cards issued outside the region, a move that comes after merchants alleged that networks and banks colluded to inflate those fees.

The European Commission said both companies made offers to lower these fees -- known as interregional interchange fees -- by a minimum of 40%. The commission, which has asked for feedback on those proposals, said the fees are applied to payments made in the EU and three other European countries with cards issued outside of the region.

Card networks like Visa and Mastercard set interchange fees. But it is the banks that profit from them because merchants pay the banks when customers pay with their cards.

That means that getting lower fees from European purchases could have deep implications for U.S. banks. In recent years, they have focused their credit-card businesses on more affluent customers, many of whom travel and spend outside the U.S.

The commission is worried that the fees could raise prices for companies in Europe, potentially driving up prices for consumer goods and services.

Credit-card companies have been locked in disagreements over fees charged to merchants with officials in the U.S. and Europe for years.

The European Commission raised concerns about Mastercard's interchange fee practices for cross-border transactions in 2007 and it released a statement in 2009 objecting to Visa's interchange fee practices.

More than 400 U.K. merchants also have sued Visa since 2013 seeking damages for certain interchange fees, Visa said in its annual filing. As of Sept. 30, Visa said it had reached settlements with more than 75 of those merchants.

In the U.S., Visa and Mastercard were part of a group of firms that agreed to a $6.2 billion settlement with merchants related to card fees.

Under the proposals, interregional interchange fees would be capped at 0.2% of the transaction value for debit cards and 0.3% for credit cards when carried out in person. Fees for online purchases would be capped at 1.15% for debit cards and 1.5% for credit cards.

Transactions where a card isn't present -- or purchases made online -- usually have higher rates because they can be riskier and are more complicated, a Visa spokeswoman said.

The European Commission plans to test these proposals in the market before they become permanent, and the new rates would go into effect six months after that decision is made. The commitments would be effective for 5 1/2 years.

Mastercard said Tuesday in a securities filing that it took the action to avoid prolonged litigation. It expects to record a roughly $650 million charge in the fourth quarter in connection with the matter.

Mastercard said it isn't admitting that its practices violated EU competition rules.

In recent Tuesday trading, shares of Mastercard dropped more than 3% and Visa fell nearly 3%.

--AnnaMaria Andriotis contributed to this article.

Corrections & Amplifications Under the proposals interregional interchange fees would be capped at 0.2% of the transaction value for debit cards and 0.3% for credit cards when carried out in person. Fees for online purchases would be capped at 1.15% for debit cards and 1.5% for credit cards. An earlier version of this article incorrectly stated those percentages would be the fees. (Dec. 4, 2018)

Write to Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

December 05, 2018 02:47 ET (07:47 GMT)

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