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Last Updated: Friday, 30 June 2006, 22:26 GMT 23:26 UK
Brussels challenge to Mastercard
Mastercard symbol
Brussels has Mastercard in its sights
The international credit card organisation Mastercard has been threatened with action by the European Commission.

The commission says the interchange fees that banks charge each other for processing card payments are too high.

A minimum fee is set by Mastercard and the commission believes this restricts competition among those banks.

Mastercard and its rival Visa dominate the world market for credit card payment systems.

The commission sent Mastercard a formal "statement of objections" earlier in June.

It was not convinced, it said, by the company's view that the benefits of an efficient system outweighed any restriction on price competition that might affect the banks using its cards.

It said it was taking a "preliminary view" that by setting a minimum price retailers have to pay for taking MasterCard- and Maestro-branded payment cards, the firm was restricting competition.

"The Commission's preliminary view is that such behaviour is contrary to the EC Treaty's ban on restrictive business practices," it said.

UK action

The commission first objected to the interchange fees in September 2003, and in April this year said that European consumers were being charged too much for using credit cards.

Its latest step runs parallel to the recent decision of the Office of Fair Trading (OFT) to carry on with its own action against Mastercard over this issue in the UK.

Earlier in June, the OFT dropped its own ruling against the Mastercard fee arrangements which existed before November 2004, under which the fees were set after agreement with the banks issuing its cards.

Mastercard now sets the fees on its own but the OFT thinks this is still a flawed system and intends to challenge it.

The OFT has described the fees as a "tax on UK consumers" because the costs are passed onto customers.

Mastercard and Maestro cards account for 45% of all card payments in the European Economic Area.

In 2004 there were a total of 23 billion card payments in the EU, with a value of 1,350bn euros.

Shares in Mastercard fell in earlier trading but were unchanged at $48 when the markets closed.

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