BRUSSELS (Reuters) - The European Union's executive arm will rule on Wednesday that MasterCard's <MA.N> method of charging fees for international purchases violates EU antitrust rules, a source familiar with the situation said.
By David Lawsky and Huw Jones
BRUSSELS (Reuters) - The European Union's executive arm will rule on Wednesday that MasterCard's <MA.N> method of charging fees for international purchases violates EU antitrust rules, a source familiar with the situation said.
The European Commission will say the current "interchange fees" are not valid but another method of computing them may be acceptable, the source said on Monday. Competition Commissioner Neelie Kroes has said the current system rip offs consumers.
Shops and other providers pay fees to their banks for each MasterCard purchase. The U.S. card firm sets many fees, which together average around 1 percent of the purchase price.
!ADVERTISEMENT!The seller's bank then pays the "interchange" fee to the cardholder's bank.
The Commission will allow MasterCard to design a different interchange fee plan, the source said.
MasterCard has said it should keep the principle of setting its own fees and that the EU executive has no power to cap them.
Twelve of the EU's 27 countries have been examining fee structures in domestic card schemes, and the Commission decision will shape how they deal with those schemes' interchange fees.
International transactions account for 3 percent of card usage but this is expected to grow as barriers to cross-border services are torn down and people become more mobile.
Retailers have complained about interchange, saying they are forced to spend billions of euros on a fee that includes provision for non-payment, fraud, promotions and free credit.
Shops have said they should pay only for the electronic transaction needed to complete a purchase.
Card-issuing banks have said in the lead-up to the decision that it might push up annual card fees and make it uneconomic for new schemes to be set up to rival MasterCard and Visa.
Visa Europe has already agreed to cap its interchange fee at 0.7 percent in a multi-year deal with the European Commission that runs out at the end of December.
MasterCard had said it expected a negative ruling and mapped out an appeal.
Next month, the EU launches a single euro payments area that aims to make cross-border credit transfers, card payments and direct debits as easy and cheap as domestic ones.
Kroes and the European Central Bank hope it will spur competition in card payments but so far no new credit card scheme is ready to launch as the whole industry is waiting to see what impact Kroes' decision will have on business models.
Earlier this month, Kroes said new schemes need not cover all EU countries from the start, a plea which card industry officials said sounded desperate.
(Editing by Dale Hudson)
