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FTC orders Mastercard to stop blocking competing debit payments

The Federal Trade Commission has ordered Mastercard to end a series of business practices aimed at forcing competitors to use its payment network.

According to the FTC, the world’s second-largest payment processing corporation intentionally blocked vendors’ abilities to route e-commerce transactions through third-party payment networks such as virtual wallets.

This, according to the commission, violates a provision of the Dodd-Frank Act of 2010 that requires banks to allow sellers to choose between at least two unrelated payment networks.

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A close-up of the Mastercard logo on the appearance of the envelope used to send the statements. Financial Industry, Toronto, Ontario, Canada, May 13, 2019. (Roberto Machado Noa/LightRocket via Getty Images/Getty Images)

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M.A MASTERCARD INC. 343.60 +2.08 +0.61%

“The Federal Trade Commission is ordering an end to the unlawful business tactics used by Mastercard to force merchants to route debit card payments through its payment network, and requires Mastercard to stop blocking the use of competing debit payment networks,” the FTC said. in a statement from Friday.

At the heart of the dispute is Mastercard’s implementation of payment tokenization — a process through which payment networks replace cardholders’ sensitive financial information with alternative, less sensitive IDs.

These numeric IDs can be held by third-party services such as virtual wallets and payment applications.

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There are three Mastercard credit cards in this photo illustration. Financial company branding and marketing logo. Conceptual image related to work. (Photo illustration by Roberto Machado Noa/LightRocket via Getty Images)

Mastercard has full control over the tokenization process of its cardholders, forcing third parties to work with the company to use the cards.

A Mastercard spokesperson confirmed the settlement with the FTC, telling FOX Business that the company believes its practices were legal, but that changes will be made to meet the FTC’s requirements.

“We believe our existing routing practices are legal and have always provided choice to merchants.” We will continue to work to update our processes to comply with the consent order and provide even greater choice,” the company told FOX Business in an exclusive statement.

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Several Visa credit cards

Visa credit cards are spread out on the table. (Justin Sullivan/Getty Images/Getty Images)

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V VISA INC. 205.83 +0.77 +0.38%

Mastercard further told FOX Business that it stands by its tokenization practices as a form of commercial security.

“While we take these steps to bring this matter to a close, there should be no doubt that tokenized transactions provide an increased level of protection for both consumers and merchants,” Mastercard said.

The Wall Street Journal reported in October that the FTC was investigating Mastercard and Visa over security tokens. The people told the Journal that the FTC has been investigating the two companies for years, but recently expanded its investigation to focus on routing challenges arising from security tokens.

Both companies are promoting the technology because they believe tokenization helps protect against fraud, the report said.

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