WASHINGTON—The Merchants Payments Coalition (MPC) welcomed an order by the Federal Trade Commission in late December that Mastercard cease practices the agency says have illegally blocked merchants’ ability to route e-commerce debit card transactions over competing networks. NACS is a founding member of the MPC.
“Main Street businesses thank the Federal Trade Commission for its work to ensure that Mastercard stops blocking competition for e-commerce debit card payments,” said Doug Kantor, NACS general counsel and MPC executive committee member. “More than a decade after debit reform became law, it is well past time for Mastercard and also Visa and major banks to drop all of their efforts to undermine debit card competition. We look forward to additional enforcement actions to ensure that happens.”
The FTC said an investigation found Mastercard’s tokenization of debit card data and refusal to de-tokenize that data for competitors has prevented e-commerce transactions from being routed over networks like Star, NYCE or Shazam that can offer lower swipe fees for processing. The agency said that violates the Durbin Amendment, a 2010 law that requires that at least two unaffiliated networks—Visa or Mastercard plus a competitor—be enabled on debit cards and that the merchant be allowed to choose which to use.
The FTC ordered that Mastercard make the primary account number and other data available to competing networks going forward even if has been tokenized. The agency specifically cited Mastercard’s treatment of data from transactions made with digital wallets like Apple Pay and Google Pay as having violated the Durbin Amendment, but the order applies to all e-commerce transactions, including digital wallets and online purchases.
The FTC action follows regulations issued by the Federal Reserve in October clarifying that debit card routing choice applies to online transactions the same as in-store transactions and said Visa and Mastercard cannot take steps to block routing. Tokenization and other practices have kept all but about 6% of online debit transactions from being routed over competing networks, according to the Fed.
The Durbin Amendment has saved merchants billions of dollars a year in swipe fees, with 70% of the savings passed on to consumers, according to studies. Debit card swipe fees cost merchants and their customers $32.6 billion in 2021, with payments processed over Visa and Mastercard’s networks accounting for $28.1 billion of the total.