
Mastercard sued for $19B in Britain's biggest damages claim - iamben
http://www.reuters.com/article/us-mastercard-lawsuit-britain-idUSKCN11E2S9
======
mysterypie
> Two years ago, the European Union capped the fees retailers pay at 0.2
> percent for debit cards and 0.3 percent for credit cards.

How is it possible that retailers in the U.S. and Canada pay 2-3% for credit
card usage, or ten times greater than legally permitted in Europe? I have to
assume that 0.3% is profitable, otherwise the credit card companies would
simply stop operating in Europe. Could this be a misprint in the original
article or are Americans and Canadians being horribly ripped off?

~~~
quantumhobbit
Much of the 2-3% US companies charge is spent in the form of rewards in the
US. The fact that US companies offer 1-1.5% back to customers as rewards
implies they can support lower fees to merchants if they get rid of rewards.
Do EU cards have cash back programs?

~~~
imglorp
So, the card gives rewards and charges higher merchant fees. The merchant
raises prices to offset the fees, which offset the customers' rewards.
Friction.

This is exactly like subsidizing farm, ranch, and oil but then raising taxes
to pay for the subsidies indirectly.

~~~
pravda
>The merchant raises prices to offset the fees, which offset the customers'
rewards.

If this were true, why would merchants care about merchant fees?

~~~
gozur88
They don't, really, as long as they're not disadvantaged compared to the
competition. The people who are getting screwed are people who pay cash or use
cards without rewards programs.

~~~
pravda
Oh...I assure you they do! Why? Because these fees come out of profits.

~~~
gozur88
Merchants will charge more when profits drop. None of this is coming out of
profits. They only time it comes out of profits is when competitors have some
advantage that prevents the merchant from passing increases on to the
customer.

~~~
pravda
If raising prices increase profits, then you're doing prices wrong! Raise
prices!

~~~
gozur88
The key is whether or not everyone else has to raise prices too.

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bimmer44
I'm intrigued by this type of case - this article doesn't mention any specific
legislative requirement that fees should have been less during the period
concerned. It's a strange precedent that a company can be retrospectively
liable for charging "too much".

This is similar to the case of Apple and their tax dues in Ireland.

Maybe someone with a better grasp of legal matters can explain a mechanism
that gives this case a chance. Otherwise I can't see this claim succeeding
without causing a great deal of business uncertainty.

~~~
rayiner
It's not that unusual in the antitrust context. The whole theory of antitrust
is that anti-competitive behavior allows a company to charge prices greater
than they would be able to charge in a competitive market. If a company is
found to have engaged in anticompetitive conduct, it's common in a civil suit
for the measure of damages to be the difference between the prices actually
charged and some judicially-determined market price (usually based on an
econometric expert analysis).

~~~
bimmer44
This makes sense - I think the Reuters article was quite misleading. I posted
another comment [1] with a link to a Guardian article that supports what you
wrote.

[1]
[https://news.ycombinator.com/item?id=12463745](https://news.ycombinator.com/item?id=12463745)

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nfriedly
My wife and I stopped using credit cards for most things because we're fed up
with the whole system. We use cash for groceries and such, the bank pays all
of the bills automatically, and we use debit cards for retailers that we trust
online (mostly amazon). Credit card use is fairly rare in my house these days.

~~~
shortsightedsid
How do you build credit history? Also, isn't it easy to dispute credit card
transactions as opposed to debit card because with a debit card money is
immediately removed from your account.

~~~
craigds
Why would you need a credit history if you don't use credit?

~~~
criddell
Some employers will run credit checks on prospective hires.

~~~
pacaro
I've had my credit checked as part of background checks the last two times
I've changed jobs. AFAICT they aren't interested in my (abysmally low) credit
score, but are rather using it as a signal that I am who I claim to be - which
is essentially what the background check is for in the first place.

A very low credit score doesn't stop me renting an apartment either, probably
for similar reasons. Although it did mean I couldn't rent in the presidio

------
webtechgal
Wondering if the crux of the suit could be applicable/have implications in
other parts of the world as well?

~~~
johansch
That's almost guaranteed. Most other parts of the world are (even) more
corrupt though.

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designium
This shows how important for Fintech companies to care for regulations and
compliance as equally or more than just focusing on the technology side.

------
justinlardinois
To make sure I understand, Mastercard illegally overcharged for credit card
processing, and merchants passed the charge onto consumers, so consumers have
standing to sue Mastercard.

If I've got that right, can someone with an understanding of British law
explain how that works? In a case like this in the US I don't think consumers
would be able to sue a card issuer.

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matt_wulfeck
I wouldn't mind using my debit card more often if it had the same type of
insurance against fraud as my credit cards.

I don't really care about cash back and I know that retailers pay high fees,
but I don't get any kind of cash discount with debit other than gas and I
don't want to risk having my check account cleaned out.

~~~
teuobk
If you put everything on a good cash-back card, and you pay off your balance
every month, it can really add up. Let's say you run $30k a year through your
card and have something like the 2% cash back Citi DoubleCash Mastercard.
That's $600 a year you're foregoing by not caring about cash back. Just a
thought.

~~~
matt_wulfeck
It's not that I don't care about cash back, but I would simply prefer prices
in general be 2% cheaper rather than having to claim them via a cash back
card.

This type of thing warps price perception and just passes the costs back onto
consumers in other ways.

~~~
awqrre
It probably passes the costs back onto poor consumers (or the ones that can't
get credit cards).

------
smitherfield
> _Mastercard is alleged to have done this for 16 years between 1992 and 2008
> ..._ Two years ago _, the European Union capped the fees retailers pay at
> 0.2 percent for debit cards and 0.3 percent for credit cards._

Seems the EU is getting rather fond of the retroactive law change shakedown,
at least when it comes to US companies.

~~~
Scirra_Tom
Two years ago the EU capped the fees, but that's immaterial to the fact that
the fees prior to that were determined to be illegal under anti trust laws.
The article is confusing, it's written badly and is mixing numbers and laws
up. My understanding is this is not a retro active shakedown.

Also, I can only assume you're referring to Apple's case. My understanding is
that calling it a retro active law shakedown is misleading. It was always
illegal (who to blame for facilitating the behaviour is another question).

Consumer protection was one of the main reasons I voted to stay in the EU.
Without the EU's clout these companies would be exploiting consumers
relentlessly indefinitely and it's good to have an entity with clout who are
able to fight back.

~~~
marcoperaza
How is a 1% fee excessive? If you don't like MasterCard's rates, then don't
accept MasterCard. If the government wants to ban such rates, then ban them.
But allowing it for 20 years then digging up some vague "excessive fees"
provision and demanding two decades and $20 billion worth of "excess profit"
is nothing but a business-hostile dishonest shakedown.

~~~
Scirra_Tom
> If you don't like MasterCard's rates, then don't accept MasterCard.

Visa and Mastercard basically have a monopoly on the market. To not accept
Mastercard would do orders of magnitude more damage to your business than the
impact your protest of not accepting them would have. It's completely
unrealisitic to present that as a sensible option.

> is nothing but a business-hostile dishonest shakedown.

From the Guardian:

“MasterCard charged billions of pounds of unlawfully high fees for its sole
benefit and to the detriment of consumers. It has already been found to have
broken competition law, the basis of which was to protect consumers, and that
cannot be disputed. There is no basis upon which MasterCard can contend that
its card fees were not unlawful.”

So actually, Mastercard are the ones being business-hostile here.

~~~
dkksfj
Well if they have a monopoly then someone should tell Diners Club, Discover
and UnionPay to pack up shop and go home.

~~~
germanier
Oh, cards with <1% market share (Discover) or not issued at all in Europe
(Diners, UnionPay)?

~~~
ersii
There are Diners cards in Sweden at least. Last time I checked, Sweden was
still in Europe.

~~~
germanier
Thanks for noticing, I mixed up Disover and Diners. The former is not issued
in Europe, the latter has under 1% market share (according to the Nielson
Report).

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marcoperaza
How is it possibly fair to demand repayment for two decades of "excessive
fees" which are not defined in the law and were only clarified by the EU in
the last two years. Unless I'm missing some crucial information, this just
looks like a shakedown of an American company.

~~~
jayflux
Isn't this what happened with Apple in Ireland? They only decided _now_ that
it's wrong, yet they want apple to pay back for the last 20 or so years? Even
though back then it wasn't seen so much as a problem.

~~~
AlphaSite
Well no, in that case they decided that Ireland violated the treaties it
previously signed.

I can't compare to this case but that was only retroactive in that they
discovered the problem later.

~~~
jayflux
which is even more confusing, as the govt is being rewarded for violating
treaties by being paid back all the tax. Was the govt not more in the wrong
than Apple was? (sorry, thread hijack)

~~~
k-mcgrady
It's not a reward for the government, hence why they have lodged an appeal.
Ireland has a lot more to lose by accepting that tax money than they would
gain.

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jokoon
I live in france and many small stores don't accept debit card payments if
it's under a certain sum, like 10 or 5 euros. I asked once, and I was answered
that banks those stores for each of those payments, so stores refuse payments
if it's under, that's what I think is happening.

I already saw stores who don't accept debit cards. I don't know the reason,
but the equipment might be too expensive for them. Obviously debit card
technology is mostly american.

~~~
tonfa
> Obviously debit card technology is mostly american.

There's a french version since 1967 and it uses a chip since 1992 (probably
the first country where cards with chips was in widespread use)

[https://en.wikipedia.org/wiki/Smart_card](https://en.wikipedia.org/wiki/Smart_card)
[https://en.wikipedia.org/wiki/Carte_Bleue](https://en.wikipedia.org/wiki/Carte_Bleue)

~~~
jokoon
> In 2010, Carte Bleue was phased out and was replaced by Visa Classic debit.

The system mostly relies on american systems. I don't have anything against
it, it's just that originally, it's american, for the same reason PC computers
technology is. Non american countries don't really have their own standard,
not that it matters, but in term of how the expertise and business are owned,
it does matter.

~~~
tonfa
The global system won (because convenience), but carte bleue worked fine for
over 40 years. Many country still have their own standard (e.g. EC Card in
Germany, Dankort in Denmark, etc.), but yes over time the Mastercard/Visa
duopoly tends to win.

And as far as I know CB was not based on american technology (and the fact
that they used chip-pin so early was kinda unique), do you have source to the
contrary?

