OFT Accepts Setback, Still Pursuing MasterCard Over Fees

by Robin Pilgrim, LawAndTax-News.com, London

22 June 2006

The UK's Office of Fair Trading on Tuesday consented to the Competition Appeal Tribunal's (CAT) setting aside the OFT's September 2005 decision concerning MasterCard's historic interchange fee arrangements.

Interchange fees are payments made between banks on virtually all purchases in the UK made using Visa and MasterCard cards. These are passed on to merchants and ultimately, in the OFT's view, to all consumers through higher prices.

The OFT will now focus its resources on tackling both MasterCard's and Visa's current UK interchange fee arrangements, leaving it to affected third parties to contest the lawfulness of the old arrangements, if they choose to, in private court actions.

In view of developments since the MasterCard decision was made, the OFT has concluded that it is far better to look at MasterCard's and Visa's arrangements at the same time, and in the wider context of UK interchange fees on payment cards as a whole.

Explaining the reasoning behind the decision, OFT Chief Executive John Fingleton stated that:

"We still believe that the interchange fee arrangements that are now in place could infringe competition law and are harmful to consumers, who pay higher prices as a result of these fees."

"Continuing to defend appeals against the original decision before the Competition Appeal Tribunal diverts us from dealing most effectively with the overall problem of interchange fees. Our resources are better spent in reaching decisions on MasterCard's and Visa's current interchange fee arrangements rather than continuing with these appeals which concern only MasterCard's historic arrangements."

He continued:

"It's in the best interests of consumers and businesses to see this serious problem addressed quickly through focussing on current and future arrangements. This will allow OFT to focus on action which delivers real benefits to business and final consumers."

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