MasterCard’s fee cut under EU anti-trust scrutiny

The Commission is examining MasterCard’s move to cut interchange fees for payments within the eurozone in response to an EU anti-trust probe.

Following MasterCard’s announcement to cut its interchange fees by almost half from 1 January 2008, spokesperson Jonathan Todd said that the Commission would “examine in depth the new interchange fee scheme”.

The interchange fee is paid by the merchant’s bank to the cardholder’s bank at any point-of-sale transaction using a debit card. The flat rate per transaction will be €0.05 euro per transaction plus a surcharge of 0.2%-0.3% depending on the type of payment.

The Commission argues that the current profitability of payment-card operations was too high and called interchange fees a "tax on business and consumers". By creating a single European payments area (SEPA), the Commission aims to open up the payments market to more competition and thereby reduce the costs for consumers and business. 

Javier Perez, President of MasterCard Europe said: "The SEPA rates support MasterCard’s overall SEPA strategy and represent the final step towards Maestro’s SEPA cards framework compliance. The target date set by the Commission is for banks to issue SEPA-compliant cards by 2008 and establish a by 2010."

Peter Ayliffe, CEO of Visa Europe, underlined that "interchange needs to be set at a level that incentivises banks to invest in payment systems". He added that the success of the single European payments area depended on "a satisfactory outcome of the interchange debate".

Responding to MasterCard’s announcement, Xavier Durieu, secretary-general of EuroCommerce said: "These rates push prices up in countries benefiting from efficient debit-card schemes. The fees paid by retailers should be transparent and based on the real costs of the services rendered." 

Anti-trust proceedings against MasterCard were launched in September 2003. The Commission threatened to ban its debit and credit card interchange fees as illegal restrictions to price competition.

In June 2006 the Commission sent out another warning to MasterCard, saying that competition would be restricted by pre-determining a minimum price that retailers must pay for accepting MasterCard and Maestro payment cards.

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