Competition Law and Card Scheme Competition Concerns

1. Introduction

Card schemes such as Visa, Mastercard, American Express and domestic payment-card networks operate as multi-sided payment platforms connecting cardholders, issuing banks, acquiring banks and merchants. Their economic structure creates several distinctive competition-law concerns because the network needs cooperation among competing financial institutions while simultaneously controlling important rules governing access, pricing and transactions.

Competition authorities and courts have particularly scrutinised:

• Interchange fees and multilateral interchange fees (MIFs);
• Merchant service charges;
• No-surcharge and anti-steering rules;
• “Honour all cards” obligations;
• Restrictions on merchants choosing competing payment systems;
• Exclusivity and network-participation rules;
• Interoperability and access to payment infrastructure;
• Bundling and tying of card-processing services;
• Information exchange among participating banks;
• Discriminatory access or membership conditions;
• Network effects and barriers to entry;
• Dominance arising from a large installed merchant/cardholder base;
• Mergers involving card networks, processors and fintech payment platforms.

The principal competition-law challenge is therefore to distinguish legitimate coordination necessary for the operation of a payment network from coordination that suppresses price or non-price competition.

2. Economic Structure of a Card Scheme

A four-party card scheme normally involves:

Cardholder → Issuing Bank → Card Network → Acquiring Bank → Merchant

For example:

1. The consumer uses a Visa/Mastercard card.
2. The issuing bank authorises the transaction.
3. The card network processes and routes the transaction.
4. The acquiring bank processes the merchant's side.
5. The merchant receives the transaction value less applicable fees.
6. An interchange fee is generally transferred between the acquiring and issuing sides.

This creates a two-sided or multi-sided market.

The network must therefore balance:

• attracting cardholders;
• attracting merchants;
• encouraging issuing banks;
• encouraging acquiring banks;
• maintaining network security;
• ensuring interoperability;
• keeping transaction costs competitive.

A competition authority cannot necessarily assess one side of the market in isolation.

3. Principal Competition Concerns

A. Multilateral Interchange Fees

The most important competition issue is the multilateral interchange fee.

Where banks collectively participate in a card network, a network rule may establish the fee payable between the acquiring and issuing sides.

The concern is that a collectively determined fee may operate as a price floor for merchant acceptance costs.

If the interchange fee increases:

interchange fee ↑ → acquiring cost ↑ → merchant service charge ↑

The merchant may consequently bear the ultimate economic burden.

The European Commission's MasterCard proceedings treated the MIF as capable of restricting competition because it increased the cost base on which acquiring banks charged merchants.

Competition-law questions

Authorities may ask:

• Who determines the fee?
• Are competing banks jointly involved?
• Is the fee objectively necessary?
• Could bilateral negotiation achieve the same result?
• Does the fee reduce acquiring-bank price competition?
• Are efficiency benefits demonstrated?
• Are benefits passed on to consumers?

4. Anti-Steering Rules

Card schemes may impose rules preventing merchants from encouraging customers to use cheaper payment methods.

Examples include:

• no-surcharge rules;
• no-discount rules;
• restrictions on payment-method differentiation;
• restrictions on steering customers toward alternative networks.

These rules can reduce the merchant's ability to respond to different transaction costs.

The U.S. Payment Card litigation specifically challenged Visa and Mastercard's no-surcharge/no-discount rules, together with their interchange-fee arrangements.

Competition concern

If merchants cannot communicate:

“Payment method A costs less than payment method B,”

consumers may have less information about the actual cost of different payment methods.

The resulting competition concern is particularly important where the merchant has little bargaining power against a major card network.

5. Honour-All-Cards Rules

A card scheme may require a merchant accepting one category of cards to accept other cards within the scheme.

For example, historically, a merchant might be required to accept:

• ordinary cards;
• premium cards;
• rewards cards;
• corporate cards,

even though the different cards impose different processing costs.

The U.S. Payment Card litigation examined the “honor all cards” rule alongside interchange fees and anti-steering provisions.

Competition theory

The concern is that a merchant cannot selectively reject expensive cards.

This can weaken the merchant's bargaining position and allow the network or issuing banks to maintain higher fees.

6. Network Effects and Market Power

Card schemes benefit from powerful network effects.

The value of a card increases when:

• more consumers possess it; and
• more merchants accept it.

Likewise, merchants have stronger incentives to accept a card when many consumers carry it.

This can produce a feedback loop:

More cardholders → more merchants → more cardholders → stronger network → higher entry barriers

A new network may therefore face substantial difficulty attracting both sides simultaneously.

Competition-law consequence

A large market share does not automatically establish unlawful dominance.

However, authorities may investigate whether a large network is using its network position to:

• exclude competing networks;
• restrict interoperability;
• impose discriminatory access terms;
• prevent merchant steering;
• impose excessive or exclusionary fees;
• acquire emerging competitors.

7. Exclusivity and Membership Restrictions

Card schemes are frequently dependent upon banks participating as:

• issuers;
• acquirers;
• processors;
• network members.

Rules restricting participation in competing networks may raise competition concerns.

The classic U.S. Visa Check/MasterMoney litigation examined Visa and Mastercard's organisational arrangements and their relationships with member banks. The Second Circuit noted the substantial overlap between Visa and Mastercard membership and examined the competitive significance of their membership policies.

Competition authorities may therefore examine whether membership rules:

• prevent banks from joining competing schemes;
• increase switching costs;
• foreclose rival networks;
• reinforce network effects;
• prevent new payment systems from obtaining sufficient scale.

8. Tying and Bundling

A dominant card network may potentially create competition concerns by tying:

• card processing to other payment services;
• acquiring services to ancillary products;
• network access to processing services;
• debit and credit products;
• fraud-prevention or authentication services.

U.S. litigation concerning Visa and Mastercard has included allegations concerning tying and bundling in addition to interchange fees and acceptance rules.

The relevant question is whether the arrangements produce legitimate efficiencies or instead leverage market power from one service into another market.

9. Interoperability and Access

Competition can also be affected by technical interoperability.

Modern card ecosystems increasingly interact with:

• mobile wallets;
• tokenisation systems;
• digital identity;
• payment gateways;
• payment processors;
• instant-payment systems;
• fintech platforms.

A dominant network could potentially disadvantage rivals through:

• discriminatory technical access;
• refusal to provide necessary interfaces;
• discriminatory tokenisation conditions;
• unreasonable certification requirements;
• exclusionary technical standards.

Competition analysis must distinguish genuine security and fraud-prevention requirements from unnecessarily restrictive conditions.

10. Relevant Market Definition

Card schemes create difficult market-definition questions because there are multiple sides.

Possible markets include:

Consumer side

• payment cards;
• credit cards;
• debit cards;
• digital payment instruments.

Merchant side

• card acceptance services;
• merchant acquiring;
• payment-processing services.

Network side

• payment-card network services;
• transaction-routing services.

Geographic market

Depending on the conduct, the relevant market may be:

• national;
• regional;
• EU/EEA-wide;
• international.

The appropriate market depends upon substitutability, regulatory conditions, network characteristics and consumer behaviour.

11. At Least 6 Important Case Laws

1. Visa International – Multilateral Interchange Fees, European Commission

The European Commission investigated Visa's interchange arrangements and considered whether collectively determined interchange fees restricted competition.

The case is important because it demonstrated that interchange arrangements within a payment network can fall within competition-law scrutiny.

Principle

A collectively determined interchange mechanism may raise Article 101 concerns where it artificially increases the price paid by merchants for accepting cards.

The analysis also requires consideration of whether the arrangement satisfies the conditions for exemption based on efficiencies.

2. MasterCard – Interchange Fees, European Commission, 2007

This is one of the leading card-scheme competition cases.

The European Commission concluded that MasterCard's intra-EEA MIF arrangement restricted competition because it effectively established a minimum cost for merchants accepting MasterCard cards.

The Commission rejected the justification then advanced by MasterCard because the necessary evidence demonstrating sufficient efficiency benefits had not been established.

Significance

The case established the importance of:

• MIFs;
• Article 101(1);
• Article 101(3);
• merchant costs;
• efficiency evidence;
• consumer benefit.

3. Mastercard Inc. v. European Commission / MasterCard – CJEU, 2014

The litigation ultimately reached the Court of Justice.

The Court upheld the central finding that MasterCard's intra-EEA MIF arrangements constituted a restriction of competition and rejected the argument that the arrangements were simply indispensable to the functioning of the payment system.

Principle

A payment network cannot automatically escape Article 101 simply because a particular restriction facilitates operation of the network.

The network must demonstrate that the restriction is genuinely necessary and satisfies the applicable competition-law conditions.

4. Groupement des Cartes Bancaires (CB) v European Commission, CJEU, 2014

This case is particularly important for understanding the concept of a restriction by object.

The Court held that competition authorities must be careful before characterising a complex payment-system arrangement as a restriction of competition by object.

The legal and economic context of the arrangement must be examined.

Importance for card schemes

Card networks involve complex technical and economic arrangements.

Therefore:

not every restrictive-looking payment-network rule is automatically a restriction by object.

The authority must identify sufficiently serious harm to competition.

This case remains important for analysing payment-network rules under Article 101 TFEU.

5. Ohio v. American Express Co., U.S. Supreme Court, 2018

This is a major U.S. payment-card case.

American Express imposed anti-steering provisions restricting merchants from encouraging customers to use alternative payment methods.

The Supreme Court treated the credit-card platform as a two-sided transaction platform and held that the plaintiffs had to establish anticompetitive effects by considering both sides of the platform.

Principle

In multi-sided payment markets:

• cardholders matter;
• merchants matter;
• pricing on one side may affect participation on the other.

Therefore, competition analysis cannot always focus exclusively on the merchant side.

6. United States v. Visa U.S.A. Inc. and Mastercard International Inc., 2001

The U.S. Department of Justice challenged Visa and Mastercard rules concerning relationships with member banks.

The case concerned restrictions preventing member banks from issuing cards through competing networks.

Competition concern

The government argued that the rules restrained competition between payment networks by limiting banks' ability to support competing systems.

Significance

The case illustrates how network membership and exclusivity rules can reinforce market power.

7. In re Visa Check/MasterMoney Antitrust Litigation, Second Circuit, 2001

The litigation involved Visa and Mastercard's relationships with member banks and the structure of the payment-card networks.

The Second Circuit examined the substantial overlap between Visa and Mastercard membership and the resulting competitive implications.

Principle

Where competing payment networks have extensive common membership, competition law may examine whether common membership and network rules facilitate coordination or restrict competition.

8. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Second Circuit, 2016

This enormous U.S. merchant litigation concerned Visa and Mastercard interchange fees and related network rules.

The litigation challenged:

• default interchange fees;
• honour-all-cards rules;
• no-surcharge rules;
• no-discount rules;
• anti-steering provisions.

The Second Circuit's 2016 decision addressed serious procedural and class-certification issues concerning the proposed settlement.

Significance

It demonstrates the breadth of antitrust exposure created by card-network rules affecting millions of merchants.

9. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Second Circuit, 2023

The litigation eventually produced a settlement involving a merchant class exceeding 12 million merchants, with approximately $5.6 billion in settlement value. The Second Circuit affirmed approval of the settlement in 2023.

Competition-law significance

The case demonstrates the enormous private-enforcement consequences that can follow alleged anticompetitive card-network conduct.

It also illustrates the importance of:

• class actions;
• merchant standing;
• damages;
• settlement structures;
• interchange-fee claims.

10. Sainsbury's Supermarkets Ltd v Visa Europe Services LLC, UK Supreme Court, 2020

The litigation concerned Visa's multilateral interchange fees.

The UK Supreme Court's decision is highly significant for competition-law analysis of card schemes and interchange fees.

Principle

A collectively determined MIF can restrict competition because it influences the economic terms on which merchants obtain card-acquiring services.

The case also illustrates the importance of:

• counterfactual analysis;
• alternative fee arrangements;
• Article 101;
• damages;
• exemption arguments.

11. Mastercard Incorporated v Merricks, UK Supreme Court, 2020

This case concerned collective proceedings arising from Mastercard's interchange fees.

The Supreme Court considered whether the proposed collective action could proceed.

Significance

The case is particularly important for understanding:

• competition damages;
• collective proceedings;
• pass-on issues;
• aggregate assessment of loss;
• the practical enforcement of competition law in payment-card markets.

The UK Competition Appeal Tribunal continues to deal with extensive Mastercard and Visa interchange-fee litigation; in 2025 it found an Article 101 infringement in Trial 1 of the Merchant Interchange Fee Umbrella Proceedings, with exemption issues continuing into subsequent proceedings.

12. Comparative Legal Framework

13. India: Competition Concerns in Card Schemes

In India, card-scheme competition has to be analysed alongside the regulatory framework governing payment systems.

The Competition Act, 2002 provides the principal competition-law framework.

Potentially relevant provisions include:

Section 3

Agreements between enterprises that cause or are likely to cause an appreciable adverse effect on competition may be scrutinised.

This could potentially encompass:

• interchange arrangements;
• exclusivity;
• coordinated network rules;
• market-sharing;
• discriminatory contractual restrictions.

Section 4

A dominant card network could potentially face scrutiny for:

• discriminatory conditions;
• denial of market access;
• unfair pricing;
• exclusionary conduct;
• tying/bundling.

Sections 5 and 6

Transactions involving payment networks, payment processors, fintechs or related financial infrastructure may potentially raise merger-control issues where statutory thresholds are met.

14. Interchange Fees and Competition

The central economic chain can be represented as:

Card network rule

↓

Interchange fee

↓

Acquirer cost

↓

Merchant service charge

↓

Merchant's payment cost

↓

Potential effect on consumer prices

Competition analysis should nevertheless avoid assuming that every interchange fee is harmful.

Interchange arrangements can potentially generate legitimate efficiencies by:

• encouraging card issuance;
• encouraging merchant acceptance;
• financing fraud prevention;
• facilitating authentication;
• supporting network security;
• balancing participation between cardholders and merchants.

The critical issue is whether the fee is necessary and proportionate to legitimate network efficiencies, and whether competition is unnecessarily restricted.

15. Card Scheme Competition and Digital Payments

The issue has become broader because traditional card networks increasingly interact with:

• mobile wallets;
• QR payments;
• account-to-account payments;
• instant-payment networks;
• tokenised cards;
• embedded finance;
• fintech payment processors;
• buy-now-pay-later systems;
• digital banking platforms.

This creates potential competition questions concerning interoperability and access.

For example, a major card network might potentially gain additional market power if it controls:

card network + tokenisation + authentication + wallet integration + merchant acceptance.

Competition authorities may consequently examine whether control of one layer is being used to restrict competition at another layer.

16. Competition Concerns in Card-Scheme Mergers

Mergers involving:

• Visa/Mastercard-type networks;
• acquiring banks;
• payment processors;
• fintech platforms;
• payment gateways;
• digital wallets;

may produce both horizontal and vertical concerns.

Horizontal effects

A merger between competing payment networks could reduce:

• network choice;
• merchant bargaining power;
• innovation;
• price competition.

Vertical effects

A network acquiring a payment processor could potentially have incentives to:

• foreclose competing processors;
• discriminate in access;
• raise rivals' costs;
• favour its own acquiring services.

Conglomerate effects

A payment network combined with:

• wallet services;
• lending;
• fraud analytics;
• identity verification;

could potentially leverage information or network advantages across adjacent markets.

17. Efficiency Defence

Card schemes frequently have legitimate efficiency justifications.

Potential benefits include:

1. Fraud reduction;
2. Faster settlement;
3. Global acceptance;
4. Transaction security;
5. Standardisation;
6. Authentication;
7. Consumer rewards;
8. Innovation;
9. Reduced transaction costs.

Competition law therefore should not treat every common network rule as inherently unlawful.

The key question is whether:

competitive harm > legitimate efficiencies

and, under applicable exemption rules, whether the efficiencies satisfy the statutory requirements.

The MasterCard proceedings are particularly important because the European Commission required evidence demonstrating that claimed benefits satisfied the relevant exemption conditions.

18. Remedies

Where anticompetitive conduct is established, possible remedies include:

Structural remedies

• divestiture;
• separation of businesses.

Behavioural remedies

• reduction or regulation of interchange fees;
• removal of anti-steering rules;
• allowing merchant surcharging;
• permitting selective acceptance of card categories;
• non-discriminatory network access;
• interoperability requirements.

Regulatory remedies

Central banks and financial regulators may additionally impose:

• interchange-fee caps;
• transparency obligations;
• payment-system access rules;
• routing requirements;
• interoperability requirements.

19. Key Legal Principles Emerging from the Cases

Principle 1 — Interchange fees can attract antitrust scrutiny

A fee established through network arrangements can influence merchant prices and therefore competition.

Principle 2 — Multi-sided markets require careful analysis

The impact on merchants cannot always be assessed independently from the impact on cardholders.

Principle 3 — Network rules can constitute restraints

Rules concerning membership, steering and acceptance can have competitive effects even when they are not traditional price agreements.

Principle 4 — Network effects matter

Large card networks may possess significant structural advantages that increase barriers to entry.

Principle 5 — Efficiency arguments require evidence

The mere assertion that a payment rule is necessary for network functioning is not necessarily sufficient.

Principle 6 — Anti-steering rules deserve particular attention

Preventing merchants from responding to payment costs can weaken competition between payment methods.

Principle 7 — Competition law and payment regulation overlap

Card schemes are often simultaneously governed by competition authorities and financial/payment regulators.

Principle 8 — Private enforcement is significant

The U.S. and UK interchange litigation demonstrates that card-scheme competition issues can generate enormous private damages exposure. The U.S. litigation alone has involved more than a decade of proceedings and settlements concerning millions of merchants.

20. Conclusion

Card schemes present a distinctive competition-law problem because they are multi-sided network markets in which cooperation is simultaneously necessary for interoperability and capable of producing anticompetitive effects.

The principal concerns are multilateral interchange fees, anti-steering rules, honour-all-cards requirements, exclusivity, discriminatory access, tying, interoperability restrictions, network effects and market foreclosure.

The leading authorities—including MasterCard MIF, Groupement des Cartes Bancaires, Ohio v American Express, Visa Check/MasterMoney, Payment Card Interchange Fee litigation, Sainsbury's v Visa and Merricks v Mastercard—demonstrate that competition law must examine both the economic architecture of the payment network and the actual competitive effects of its rules.

For examination purposes, the central proposition is:

A card-scheme rule is not competition-neutral merely because it facilitates the operation of a payment network; its legality depends upon its competitive effects, economic justification, necessity, proportionality and the applicable statutory framework.