Released: July 01, 2006

MasterCard criticized on bank fees by Europe

Source: By Paul Meller, New York Times (Free Registration)

The European Commission said Friday that it had accused MasterCard of conducting restrictive business practices in the European credit and debit card market.

If the commission rules against MasterCard, the company could be forced to end a transaction charge known as a cross-border interchange fee. The company would not be fined because it notified the commission about the fees long before antitrust officials started their investigation, Jonathan Todd, a commission competition spokesman, said Friday.

Behind a card purchase in a store is a three-way transaction involving the bank that issues the customer’s card, the bank that provides the store with the payment mechanism and the card company. The retailer’s bank pays the interchange fee to the card-issuing bank, and the card company sets the minimum price.

In Europe, the fees range from 0.8 percent of the value of a transaction when it involves a card with a computer chip to 1.3 percent when it involves a signature-based transaction.

The commission says that interchange fees on cross-border transactions amount to restrictive business practices because they prevent the banks from competing to offer lower fees to retailers, and indirectly to consumers. “The system could work without these fees,” Mr. Todd said.

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