In a landmark ruling recently, the Mauritius Supreme Court overturned the country’s Competition Commission’s decision to impose a 0.5% cap on interchange fees* for bank card transactions. The decision favored global payment giants MasterCard International, Visa Worldwide, and the Bank of Commerce and Production (BCP), which had challenged the regulatory authority’s earlier ruling. The ruling represents a major win for the fintech ecosystem in Mauritius.
The case revolved around a 2019 decision by the Competition Commission, which deemed that certain practices related to interchange fees constituted a restrictive business conduct. The commission had imposed a ceiling of 0.5% on the fee, which is charged between banks for transactions involving bank cards at points of sale, and this cap was set to last for five years.
Context of the Ruling
The issue originated in 2012 when the executive director of the Competition Commission launched an inquiry into potential anti-competitive practices within the card payments industry in Mauritius. The commission’s investigation focused on interchange fees, set by Visa and MasterCard, charged between banks for card transactions. Local banks such as ABC Banking Corporation, AfrAsia Bank, Bank of Baroda, Bank One, and others participated in the card payment schemes operated by the two multinational companies, alongside non-bank financial institutions like CIM Finance.
The Competition Commission’s inquiry culminated in a public hearing held in July 2018, leading to its 2019 ruling that interchange fees represented a restrictive practice. As a remedy, the commission imposed the 0.5% cap on fees for five years, triggering appeals by MasterCard, Visa, and BCP.
Appeals and Legal Arguments
In their appeals, MasterCard, Visa, and BCP raised several critical points. MasterCard, for instance, argued that it had not been granted a fair hearing by the Competition Commission, which failed to offer sufficient opportunities to present its case following the 2018 public session. The company also contended that the commission’s decision was based on inaccurate data provided by its executive director and emphasized the potentially negative economic impact of the imposed fee cap.
The appellants maintained that the Competition Commission had not conducted its own independent analysis but merely endorsed the conclusions of its executive director. Furthermore, they argued that the commission had ignored alternative proposals put forward by the companies involved.
Supreme Court’s Judgment
In their rulings, Supreme Court judges Aruna Devi Narain and Véronique Kwok Yin Siong Yen agreed with the appellants. The judges highlighted that the Competition Commission is bound by principles of natural justice and fairness under the Competition Act, which requires it to provide adequate reasoning for its decisions and to properly consider the arguments presented by entities under investigation.
In its judgment, the court criticized the commission for failing to provide sufficient justification for endorsing the executive director’s findings and dismissing the remedial measures suggested by the appellants. The judges stated: “We are satisfied in the circumstances that the Commission has failed to discharge its statutory duty to give adequate reasons for its decision, in particular in respect of its endorsement of the Executive Director’s report and its ignorance of the representations made by the appellant.”
As a result, the Supreme Court annulled the commission’s decision and referred the matter back to the Competition Commission, which must now re-evaluate the case in accordance with the provisions of the Competition Act. However, the court ruled that the Competition Commission would only bear the legal costs for MasterCard’s appeal.
Implications for the Financial Sector
The Supreme Court’s ruling is a significant development for the banking, payments and fintech industry in Mauritius. Interchange fees, a key revenue source for card issuers, are often a subject of regulatory scrutiny globally. The case underscores the importance of regulatory authorities conducting thorough and independent investigations, while also balancing the interests of market competition with the economic realities faced by the financial sector.
The decision could have wider implications for how regulators in Mauritius approach competition issues, particularly in sectors dominated by multinational corporations. It also highlights the challenges that regulators face when addressing the complexities of modern financial systems while ensuring fairness and transparency in their decision-making processes.
As the Competition Commission reconsiders the case, stakeholders in the fintech industry will closely watch the outcome, as it could shape the future regulatory landscape for card transactions and fees in Mauritius.
*Interchange fees are charges that a merchant’s bank pays to a customer’s bank whenever a customer uses a credit or debit card to make a purchase. These fees help cover the costs of processing the card payment and are typically set by the card networks like Visa or MasterCard. Merchants indirectly pay these fees as part of their overall payment processing costs.