MASTERCARD INTERNATIONAL INC BANKING INQUIRY PRESENTATION Competition Law Analysis of the MasterCard Scheme 18 April 2007. Overview. Consider application of Competition Act to the MasterCard scheme: Whether section 4(1)(b) is applicable? Is MasterCard an association of firms?
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“(1) An agreement between, or concerted practice by firms, is prohibited if it is between parties in a horizontal relationship [i.e a relationship between competitors] and if-
(b) it involves any of the following restrictive horizontal practices:
(i)directly or indirectly fixing a purchase or selling price or any other trading condition
(ii)dividing markets by allocating customers, suppliers, territories, or specific types of goods or services, or
“Not all arrangements among actual or potential competitors that have an impact on price are per se violations of the Sherman Act or even unreasonable restraints… Joint ventures and other cooperative arrangements are also not usually unlawful, at least not as price-fixing schemes, where the agreement on price is necessary to market the product at all”
The Court followed the BMI decision and held that:
“Thus VISA is a joint venture in that term’s most meaningful sense, ie whether or not composite entities compete with one another in any meaningful sense in the marketplace under examination. Unwarranted emphasis on the formalistic aspects of the relationship of VISA and its members institutions ignores the subtle but more significant interdependency of the members and their indivisibility with VISA”
“VISA is a joint venture type enterprise in which the [interchange fee] acts as an internal control mechanism that yields pro-competitive efficiencies that its members could not create acting alone, and helpscreate a product that its members could not produce singly…”