Wednesday, May 31, 2023
FTC representatives further noted the consent order finalizes a Dec. 23, 2022, ruling requiring Mastercard to provide customer account data to competing debit card networks. Mastercard had not been sharing this information, which prevented merchants from processing ecommerce and card-not-present debit transactions on any network other than Mastercard's, FTC officials stated.
Holly Vedova, director of the FTC's Bureau of Competition, claimed Mastercard's debit routing practices were non-compliant with Regulation 11 of the 2010 Dodd-Frank Act, commonly known as the Durbin Amendment. "Congress directed the FTC to enforce this part of the Dodd-Frank Act and prevent precisely this kind of illegal behavior," she said in a statement.
The Federal Reserve website noted Regulation 11 was put in place to "establish standards for assessing whether a debit card interchange fee received by a debit card issuer for an electronic debit transaction is reasonable and proportional to the costs incurred by the issuer with respect to the transaction."
The Fed went on to say that Regulation 11 "prohibits issuers and networks from restricting the number of networks over which debit transactions may be processed to less than two unaffiliated networks, and from inhibiting a merchant's ability to direct the routing of a debit transaction over any network that the issuer has enabled to process it."
Defining a competing payment card network as any payment network other than one that Mastercard owns, operates or is affiliated with in any way, the FTC emphasized that the Durbin Amendment requires banks to enable at least two unaffiliated networks to process a debit card transaction and bars card brands from blocking a merchant's use of any other network.
"Upon receiving a request from an Authorized Merchant, Authorized Acquirer, Authorized Competing Payment Card Network, or other Authorized Person in receipt of a Mastercard Token furnished for an Electronic Debit Transaction, Respondent shall make available a PAN for the purposes of routing to any Payment Card Network that is enabled by the Issuer on the Debit Card corresponding to that PAN," FTC officials wrote, adding that ecommerce and card-not-present debit transactions must proceed without any further delays or impediments.
Allen Kopelman, founder and CEO of Nationwide Payment Systems, openly questioned the reasoning behind the FTC ruling, noting it made no mention of any competing debit networks.
"Where's the competing debit card network?" he asked, pointing out that the ruling may create a greenfield opportunity for the near-term FedNow network rollout slated for July 2023. "Have you seen anyone invest any money into building another network since 2010? Even American Express and Discover didn't see enough potential to justify the investment and bundled their debit card networks with Visa and Mastercard."
In addition to requiring Mastercard to post a bulletin about the ruling on its website and file compliance reports for the next nine years, the FTC expressly forbids the card brand from blocking or discouraging merchants from using any other debit card rails.
Going forward, Mastercard compliance officers will need to submit an interim compliance within 60 days after the date the order, the FTC stated, and subsequently every 90 days for the first year. After that, the FTC will review annual compliance reports on May 30 for the next nine years while reserving the right to request additional reporting at any time.
"Each compliance report shall contain sufficient information and documentation to enable the Commission to determine independently whether Respondent is in compliance with the Order," the FTC wrote, advising that all compliance reporting must be verified by a certified party who is not the chief executive officer at Mastercard. 
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