In a significant development for the payment card industry, the Federal Trade Commission (FTC) has granted its final approval to a consent order mandating that Mastercard discontinue its practice of obstructing the use of competing debit payment networks.
The FTC’s investigation into Mastercard stemmed from allegations that the company employed unlawful business tactics to coerce merchants into routing debit card payments exclusively through its own payment network. The commission found that Mastercard’s actions violated provisions outlined in the 2010 Dodd-Frank Act, specifically the Durbin Amendment and its implementing rule, Regulation II.
Under the terms of the FTC’s order, Mastercard will now be required to furnish customer account information to competing networks. This crucial information will enable these networks to process debit payments, effectively ending Mastercard’s alleged practice of preventing merchants from utilizing alternative payment networks for certain e-commerce debit transactions.
The Durbin Amendment, a critical component of the Dodd-Frank Act, mandates that banks facilitate the availability of at least two unaffiliated networks on every debit card. This requirement provides merchants with the freedom to choose the most suitable network for each debit transaction, while also prohibiting payment card networks from impeding the use of other networks.
The FTC’s investigation revealed that Mastercard had implemented policies that effectively obstructed merchants from directing e-commerce transactions, involving Mastercard-branded debit cards saved in e-wallets, to alternative payment card networks. The commission concluded that these actions were a violation of the law.
The final order issued by the FTC demands that Mastercard cease such practices and provide competing networks with the necessary customer account information to process debit payments. Furthermore, Mastercard is now prohibited from taking any actions that impede merchants’ ability to choose between competing debit card networks.
The FTC’s decision to approve the final order was unanimous, with a 3-0 vote by the commission members.
The implications of this ruling may be far-reaching, as it establishes a precedent that encourages competition and innovation within the debit payment network landscape. It also reinforces the importance of adhering to regulations set forth by the Dodd-Frank Act and its associated rules. Credit card fees and other junk fees have recently been in the spotlight after the Consumer Financial Protection Bureau (CFPB) launched inquiries last year to find out if they could be anticompetitive or abusive.
Mastercard’s agreement with the FTC is limited to the admission of the jurisdictional facts presented in the complaint for settlement purposes only, but it does not constitute an acknowledgment of guilt regarding the alleged violations. This may shield Mastercard from potential follow-on damage suits, where plaintiffs would still need to prove the company’s wrongdoings.
