The decision of the Italian Council of State in the MasterCard case

On 24 February 2016, the Judges of the Italian Council of State have rendered their judgement in relation to the famous proceeding of the Italian Antitrust Authority (“AGCM” or “Authority”)’on the MasterCard circuit (I720 – Credit Cards).

The case had started in July 2009, when the Authority, prompted by an investigation conducted on the same issue by the EU Commission, initiated a proceeding aimed at verifying the possible existence of an instance of restriction of competition in the structure and in the functioning of the MasterCard circuit and the licence agreements executed between said circuit and the licensees.

While the proceeding was still on-going, MasterCard and the eight investigated licensees submitted some proposed commitments to the Authority aimed at removing all of the competition concerns identified by the Authority in the hope that the latter – pursuant to art. 14 ter of Law 287/1990 – made such commitments binding and closed the proceeding without ascertaining the breach (hence, without imposing fines).

The Authority, however, rejected the proposed commitments as insufficient and unfit to remedy the identified competition concerns and, by decision dated 3 November 2010, after having ascertained that MasterCard and the eight licensees had put in place two different instances of unlawful competition, imposed fines for an aggregate amount of more than 6 million Euro.

According to AGCM, the MasterCard circuit, or better, the association of undertakings (that AGCM had identified in the same circuit) in defining a Multilateral Interchange Fee/MIF for Italy, had in actual facts reached, on the one hand, an agreement restricting competition pursuant to art. 101 of TFUE, and, on the other hand, in executing the licence agreements with its licensees, had executed a bundle of vertical agreements breaching art. 101 of TFUE.  According to AGCM, the object and effect of said agreements was, on the one hand, the transfer of the MIF to the merchants – namely, the weakest players of the chain – and, on the other hand, the adoption of contractual clauses, in the agreements executed between the banks and the merchants, aimed at spreading the brand with the highest MIF (i.e. MasterCard).

In 2011, upon reviewing the AGCM’s decision and the measures adopted by the same, the Regional Administrative Court of the Lazio Region (TAR), to which MasterCard and the licensees had resorted, issued a favourable decision for plaintiffs.

The Administrative Court quashed the final decision of the Authority due to the unlawfulness of the decision by which the latter had rejected the proposed commitments submitted by MasterCard and its licensees.

The Council of State has confirmed the quashing of the decision by way of which the fines were imposed, but has also censured the reasoning behind the TAR’s decision.

According to the judges of the Council of State, there are no convincing reasons for deeming that, being the decision to reject the proposed commitments unlawful, such unlawfulness automatically affects the final decision. Furthermore, according to them, the AGCM’s decision to reject the proposed commitments that the undertakings had submitted, was not wholly unjustified.

The judges however, as anticipated, have blamed the AGCM’s conduct, pointing out in particular that, although AGCM had initially based its accusations on the high level of the MIF, in its final decision it has instead given as reason in favour of the existence of the agreement, the lack of economic justifications in determining it.

In so doing, AGCM, according to the judges, has deprived the parties involved in the proceeding of the possibility to adequately make their relevant deductions, infringing the right of participation that must always be guaranteed in the proceedings in which the Authority imposes fines.

The Judges of the Council of State have also censured the manner in which AGCM has ascertained the second wrongdoing. According to them, AGCM has failed to adequately demonstrate that the agreements executed between MasterCard and the eight licensees were in breach of art. 101 of TFUE.

In particular, (i) the documentation acquired was not adequate to demonstrate the existence of a common intention between the parties to pass on to the merchants the MIF, and (ii) the review of the contractual clauses included in the licence agreements did not make it possible to prove the existence of the alleged restriction by “object”.

For the above reasons, the Council of State has therefore quashed the decision by which the Authority had imposed the fines.

In the meantime, in order to promote competition in the payment card market, by issuance of Regulation (EU) 2015/751 on interchange fees for credit/debit card-based payment transactions, the European Parliament and the European Council have introduced a cap applicable to such fees.

I wrote this article together with Bice Di Sano.

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