Merchant Fee Discrimination in Competition Law

1. Introduction

Merchant fee discrimination refers to a situation where a dominant payment platform, marketplace, acquiring network, or other digital intermediary charges different fees, commissions, MDRs, service charges, or transaction costs to similarly situated merchants without an objectively justified reason.

Typical examples include:

• Merchant A is charged a 1% commission while otherwise comparable Merchant B is charged 3%.
• A platform gives lower MDR to merchants that agree to exclusivity.
• A dominant payment platform charges competing merchants different processing fees.
• A platform uses algorithms to determine that certain merchants have greater willingness to pay and consequently imposes higher fees.
• A platform gives preferred merchants rebates while imposing higher effective fees on competing merchants.
• A merchant receives a different fee merely because it also uses a competing payment platform.

In China, this issue is particularly relevant to Article 22 of the Anti-Monopoly Law, which addresses abuse of a dominant market position, and the rules concerning differential treatment. China's Platform Economy Antitrust Guidelines expressly identify differential treatment of equivalent trading counterparties as a potential abuse where it lacks legitimate justification and has the effect of eliminating or restricting competition.

The 2026 Internet Platform Antitrust Compliance Guidelines go further and specifically identify a situation where a dominant platform charges materially different commission rates to merchants with equivalent transaction conditions as a risk example.

2. Legal Framework in China

A. Article 22 — Abuse of Dominant Market Position

The central provision is Article 22 of the PRC Anti-Monopoly Law.

A merchant-fee discrimination case generally requires examination of:

1. Relevant market
2. Dominant market position
3. Different treatment
4. Comparable transaction conditions
5. Absence of legitimate justification
6. Exclusionary or restrictive effect on competition

Thus, merely charging different merchants different fees is not automatically unlawful.

The critical question is whether the merchants are materially comparable and whether the differentiation is objectively justified.

3. Platform Economy Differential Treatment

The Platform Economy Antitrust Guidelines identify several forms of differential treatment, including:

• different transaction prices;
• different payment conditions;
• different transaction methods;
• different rules;
• different algorithms; and
• differences generated through big-data analysis.

The Guidelines specifically recognize that a platform may use data concerning a counterparty's:

• payment capacity;
• consumption preferences;
• transaction history;
• usage habits; and
• other characteristics

to impose different commercial terms.

The important distinction is between legitimate price differentiation and anticompetitive discrimination.

4. What Constitutes Merchant Fee Discrimination?

Example

Suppose a dominant food-delivery platform has two restaurants:

If the platform cannot identify a legitimate cost, risk, service, or commercial reason for the difference, the disparity may raise Article 22 concerns.

By contrast, different fees may be legitimate where one merchant:

• requires substantially greater logistics services;
• has materially higher fraud risk;
• generates substantially different transaction costs;
• receives additional advertising services;
• has a different contractual duration;
• provides greater minimum-volume commitments; or
• qualifies for a genuinely available promotional program.

5. Key Legal Tests

A. Dominance

The first question is whether the platform has a dominant position.

Relevant evidence can include:

• market share;
• control over transaction infrastructure;
• network effects;
• switching costs;
• merchant dependence;
• data advantages;
• technological barriers;
• financial resources;
• access to users;
• ability to control platform rules.

A fee-discrimination claim is considerably stronger where merchants cannot realistically switch to competing platforms.

B. Are the Merchants Similarly Situated?

This is one of the most important issues.

Chinese platform guidance considers whether differences exist in matters such as:

• transaction security;
• transaction costs;
• creditworthiness;
• position in the transaction chain;
• duration of the relationship.

The 2026 compliance guidance expressly states that equivalent trading conditions can exist despite differences in personal transaction history or preferences where those differences do not materially affect the transaction.

C. Is There a Legitimate Justification?

Possible justifications include:

• different costs;
• different risk;
• volume discounts;
• genuine promotional programs;
• different service packages;
• investment in merchant acquisition;
• different payment-processing requirements;
• fraud-prevention costs;
• contractual commitments;
• objectively different commercial circumstances.

The burden of analysis therefore should not stop at discovering different prices.

6. Six Important Case Laws / Enforcement Decisions

1. Meituan — Online Food-Delivery Platform Antitrust Case

SAMR, 2021

This is one of the most important Chinese precedents for merchant-fee discrimination.

SAMR found that Meituan had used differential fee rates, together with other mechanisms, to induce merchants to enter exclusive arrangements.

The investigation found that Meituan used differential rates, delayed merchant onboarding, deposits, data and algorithms, and other measures to implement its "choose one from two" strategy. SAMR concluded that the conduct restricted competition and violated the prohibition on imposing exclusive dealing without justification.

Relevance to merchant fee discrimination

The case demonstrates that a different commission or fee is not examined in isolation.

A differentiated fee can become particularly problematic where it is used as an economic weapon to:

• punish multi-homing;
• reward exclusivity;
• disadvantage competing platforms;
• increase switching costs; or
• foreclose rivals.

Principle:

Differential merchant fees may become an abuse when they are used as an instrument to reinforce exclusivity or restrict platform competition.

2. Trip.com — Online Hotel Booking Platform Case

SAMR, 2026

The Trip.com investigation and penalty provide an important modern platform example.

SAMR found that Trip.com had a dominant position in China's online hotel-booking platform market and used platform rules and technology to restrict hotel merchants.

Among the practices identified were requirements concerning exclusive cooperation and cross-platform lowest-price requirements, backed by technological monitoring and sanctions such as traffic restrictions and removal from preferred status.

Relevance

Although this was not a pure "different merchant fee" case, it demonstrates how a dominant platform's economic and algorithmic treatment of merchants can be assessed together.

The case is particularly relevant where different fees are connected with:

• preferential traffic;
• merchant status;
• platform exclusivity;
• price restrictions;
• algorithmic enforcement.

Principle:
A platform's economic differentiation may be assessed as part of a broader system of discriminatory platform treatment.

3. MasterCard Inc. v European Commission

CJEU, Case C-382/12 P, 2014

This is a major comparative payment-system authority.

The European Commission had found that MasterCard's multilateral interchange fees affected competition between acquiring banks serving merchants.

The Court upheld the essential competition-law reasoning concerning the impact of interchange fees on the acquiring market. The MIF increased the cost base of merchant service charges and restricted price competition between acquiring banks.

Relevance

The case is particularly valuable for merchant-fee analysis because it distinguishes:

• interchange fees;
• acquiring services;
• merchant service charges; and
• competition between acquiring banks.

Principle

A fee imposed at one level of a payment ecosystem can indirectly determine or inflate the prices ultimately paid by merchants.

Therefore, competition authorities may examine the economic mechanism through which a payment fee affects merchant prices, rather than looking only at the formal contractual charge.

4. Visa/Mastercard Merchant Interchange Fee Litigation — UK

Competition Appeal Tribunal / UK litigation

The long-running UK merchant litigation concerns Visa and Mastercard multilateral interchange fees paid by merchants through their acquiring banks.

The Competition Appeal Tribunal's proceedings have examined whether the interchange-fee system operated as a pricing floor within merchant service charges.

The Tribunal's 2025 liability judgment found infringement under Article 101(1) TFEU in relation to the relevant default interchange-fee rules; further proceedings concerning exemption remained to be determined.

Relevance

This litigation illustrates an important distinction:

Merchant-fee discrimination can involve either:

1. different fees imposed directly on merchants; or
2. upstream rules that constrain the competitive process through which merchant fees are determined.

The second category is particularly important for payment platforms.

5. Budapest Bank and Others — Interchange Fee Agreement

CJEU, Case C-228/18, 2020

The Budapest Bank litigation concerned an agreement between banks and Visa/Mastercard concerning interchange fees.

The Hungarian competition authority had found that banks and card schemes had coordinated interchange-fee arrangements.

The CJEU held that an interchange-fee agreement is not automatically a restriction "by object"; its wording, objectives and economic/legal context must be examined to determine whether it displays a sufficient degree of harm to competition.

Relevance

This case provides an important analytical warning:

Different or centrally determined fees do not automatically establish an antitrust violation.

Authorities must examine:

• the competitive structure;
• purpose;
• economic context;
• effects;
• market organization;
• counterfactual conditions.

This is useful when analysing merchant-fee structures in China's two-sided payment markets.

6. Eastman China — Dominance and Exclusive Trading Conditions

Shanghai competition authority, 2019

SAMR's summary of the 2019 enforcement cases records the Eastman China matter.

Eastman was found to have a dominant position in the relevant market for a film-forming additive and entered into agreements with customers involving "take-or-pay" and most-favoured-nation arrangements. The authority considered that these arrangements had exclusionary effects and restricted customers' ability to transact with competitors.

Relevance

Although not a payment-platform case, it provides an important Chinese dominance precedent for analysing differentiated commercial conditions and contractual mechanisms.

The case demonstrates that competition law looks beyond the nominal price to the overall commercial conditions imposed on trading partners.

7. Additional Chinese Analogies

Several other Chinese enforcement decisions are useful by analogy.

Ningbo Senpu Information Technology — 2024

The Shanghai market regulator found that Ningbo Senpu had exclusive access to real-time bond-brokerage transaction data and imposed a RMB 700,000 minimum purchase condition on information services.

The authority treated the conduct as involving an unreasonable transaction condition by a dominant operator.

This is useful where merchant-fee discrimination is embedded in:

• access charges;
• minimum purchases;
• platform access conditions;
• data-related pricing.

Nanjing Zhongran Gas — 2023

The authority found a dominant gas operator had imposed unreasonable additional charges on developers and non-residential users and required the purchase of additional products as part of gas installation arrangements.

The case demonstrates that unreasonable charges and additional commercial conditions can be scrutinized as abuse of dominance.

8. Forms of Merchant Fee Discrimination

1. Commission-rate discrimination

Example:

Merchant A: 8%
Merchant B: 15%

without a legitimate explanation despite substantially equivalent conditions.

2. MDR discrimination

A payment network may charge different merchant discount rates to equivalent merchants.

Risk increases where the difference:

• is unexplained;
• systematically disadvantages certain merchants;
• favours merchants that do not use competing payment systems; or
• increases rivals' costs.

3. Competitor-use discrimination

Example:

Merchants using only Platform X receive a 5% commission, while merchants also using Platform Y pay 10%.

This is particularly significant because the fee difference can operate as an economic incentive for exclusivity.

The Meituan case is highly relevant to this analytical structure.

4. Algorithmic fee discrimination

A platform can use algorithms to calculate merchant fees according to:

• merchant size;
• sales history;
• customer dependence;
• switching probability;
• payment behaviour;
• price sensitivity.

The 2026 Chinese compliance guidance expressly identifies algorithmically generated differences in fees and commissions as a compliance risk where equivalent merchants receive materially different treatment without justification.

5. Loyalty-based fee discrimination

A platform might offer:

"Use our payment system exclusively and receive a 30% reduction in transaction fees."

This can raise concerns where the platform is dominant and the arrangement forecloses competing payment providers.

6. Selective rebates

A dominant platform could give rebates to selected merchants.

The competition analysis should examine:

• rebate structure;
• duration;
• eligibility;
• transparency;
• incremental versus total purchases;
• foreclosure effects;
• ability of competitors to compete.

9. Merchant Fee Discrimination vs Legitimate Differential Pricing

10. Two-Sided Market Considerations

Payment platforms are usually two-sided or multi-sided markets.

They connect:

Consumers → Payment platform → Merchants

and often:

Issuing bank → Card/network → Acquiring bank → Merchant

Consequently, a fee that appears high on one side may subsidize another side.

This is why competition authorities must consider:

• merchant-side pricing;
• consumer-side pricing;
• network effects;
• transaction volume;
• cross-side demand;
• switching costs;
• entry barriers;
• total platform economics.

The MasterCard litigation is particularly important because the CJEU recognized the need to consider the economic structure of an open payment-card system rather than viewing the fee in isolation.

11. Economic Effects

Merchant-fee discrimination may produce several competition effects.

A. Raising rivals' costs

A platform may impose higher fees on merchants that also use a rival platform.

B. Foreclosure

Higher fees may cause merchants to abandon competing platforms.

C. Reduced multi-homing

Merchants may become economically dependent upon one platform.

D. Increased entry barriers

New payment platforms may find it difficult to attract merchants.

E. Reduced price competition

If merchants face different costs depending on their platform affiliation, competing platforms may be unable to compete effectively.

F. Exploitation

A dominant platform may extract excessive fees from merchants with limited alternatives.

12. Defences / Legitimate Justifications

A dominant platform can potentially justify different merchant fees by demonstrating:

1. Cost differences
2. Risk differences
3. Different transaction volumes
4. Different service requirements
5. Fraud-prevention expenses
6. Credit risk
7. Contractual commitments
8. Genuine promotional programs
9. Investment recovery
10. Objectively different merchant circumstances

The justification should ideally be:

• transparent;
• objectively verifiable;
• consistently applied;
• proportionate;
• available according to clear criteria.

13. Evidence Relevant to Enforcement

A competition authority or claimant would typically examine:

Commercial evidence

• merchant contracts;
• fee schedules;
• invoices;
• rebate agreements;
• MDR tables;
• commission records.

Digital evidence

• algorithms;
• source rules;
• merchant scoring systems;
• pricing databases;
• platform logs.

Comparative evidence

• similarly situated merchants;
• geographic comparisons;
• historical fees;
• competitor fees;
• internal benchmark groups.

Strategic evidence

• emails;
• internal presentations;
• management instructions;
• communications referring to competitor usage;
• documents concerning merchant switching.

Economic evidence

• margin analysis;
• cost allocation;
• pass-through;
• switching costs;
• foreclosure analysis;
• counterfactual pricing.

14. Important Distinction: Discrimination Is Not Automatically Illegal

This is particularly important for an exam answer.

Different fees ≠ automatically unlawful discrimination.

The analysis should be:

Different treatment → comparable merchants → dominant platform → absence of objective justification → exclusionary/restrictive effect → abuse of dominance.

If the merchants have materially different costs, risks, services, volumes, or contractual obligations, differentiated fees may be commercially legitimate.

15. Relationship With Other Antitrust Violations

Merchant fee discrimination can overlap with:

Abuse of dominance

Differential treatment under Article 22.

Exclusive dealing

Lower fees offered only to merchants agreeing not to use competitors.

Loyalty rebates

Discounts conditioned upon obtaining most or all transactions through the dominant platform.

Predatory pricing

A dominant platform subsidizes selected merchants or payment services to exclude competitors.

Margin squeeze

The platform controls an upstream payment/input service while competing downstream and sets discriminatory wholesale/merchant fees.

Tying

A merchant receives the favourable fee only if it purchases another platform service.

Unfair pricing

Excessive or unreasonable merchant fees may raise separate concerns where the legal requirements are satisfied.

16. Six-Case Comparative Table

17. Practical Hypothetical

Assume PayChina, a dominant merchant-payment platform, charges:

• Merchant A — 0.8%
• Merchant B — 0.8%
• Merchant C — 1.2%
• Merchant D — 2.5%

All four merchants:

• have the same transaction volume;
• use the same payment technology;
• have similar fraud risk;
• receive identical services.

Investigation discovers that Merchant D also accepts a competing payment network.

PayChina internally describes the 2.5% charge as a mechanism to "discourage merchants from using competing networks."

Competition analysis

The conduct raises serious Article 22 questions because:

1. PayChina may possess dominance.
2. Merchants appear similarly situated.
3. The fee differential is not apparently cost-based.
4. The higher fee is linked to competitor usage.
5. The differential can raise the rival's costs.
6. Merchants may be discouraged from multi-homing.
7. The conduct may therefore restrict competing payment networks.

The Meituan precedent is particularly useful for analysing the connection between differentiated merchant charges and exclusivity.

18. Conclusion

Merchant Fee Discrimination is an increasingly important competition-law issue in China's platform and payment economy.

The central legal inquiry is not simply whether merchants pay different fees. Instead, authorities should examine:

dominance + comparable merchants + differential fee + absence of legitimate justification + competitive harm.

The Chinese platform rules are especially important because they expressly recognize different pricing, rules, algorithms and payment conditions as possible forms of differential treatment.

The Meituan case provides the strongest Chinese enforcement analogy because differential merchant fee rates were part of a broader mechanism used to implement exclusivity. The MasterCard, Budapest Bank, and UK merchant interchange-fee proceedings demonstrate the importance of examining the economics of payment systems, merchant service charges, acquiring markets, and counterfactual competition.

For examination purposes, the key proposition is:

A dominant platform's differentiated merchant fee becomes a competition concern where similarly situated merchants receive materially different charges without objective justification and the differentiation is capable of excluding competitors, weakening multi-homing, raising rivals' costs, or otherwise restricting competition.