OFT Launches New Mastercard Probe In UK

by Robin Pilgrim, LawAndTax-News.com, London

06 February 2006

The UK's Office of Fair Trading has launched an investigation into MasterCard's new arrangements for setting the fallback interchange fees that apply to all UK domestic transactions made using UK-issued MasterCard credit and charge cards, introduced by MasterCard on 18 November 2004.

Says the OFT: 'In light of the method by which fallback interchange fees are set and applied under the new arrangements, and because these fees may continue to be set with reference to 'extraneous costs' (see note 4) and used to recover such costs, the OFT has reasonable grounds for suspecting that the new arrangements infringe Article 81 and/or the Chapter I prohibition of the Competition Act.

The investigation follows the OFT's decision on 6 September 2005, when it found that a collective agreement between members of MasterCard UK Members Forum (MMF), setting the multi-lateral interchange fee (the MMF MIF) paid on virtually all purchases in the UK made using UK-issued MasterCard credit and charge cards between 1 March 2000 and 18 November 2004 restricted competition and infringed Article 81 of the EC Treaty and the Chapter I prohibition of the Competition Act. MMF and others have appealed to the Competition Appeal Tribunal against the Decision.

In conducting the new investigation the OFT says it will seek information from MasterCard and other parties as it considers appropriate.

The judgment to be made by the Competition Appeal Tribunal in the appeal proceedings against the OFT's Decision of 6 September 2005 is likely to have a substantial, and potentially decisive, impact on the new investigation which has now been launched. Accordingly, says the OFT, any investigative steps which will be taken prior to the conclusion of those appeal proceedings will be confined to the gathering of certain further information about MasterCard's new interchange fee arrangements. The OFT does not propose to issue any statement of objections, nor to reach any decision as to infringement, until after the conclusion of the appeal proceedings.

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