OFT changes focus on MasterCard fees

The Office of Fair Trading has abandoned its longest running case, against MasterCard, in favour of a new case against both MasterCard and Visa. MasterCard has hailed the climb down and says that any further case is "fruitless".

The case centred on charges levied by MasterCard banks on shops, which the OFT called effectively a consumer tax. Action begun in 2000 did not yield a decision by the OFT until 2005, when the OFT issued a decision against the credit card group

By that time, though, the charging structure had changed. MasterCard appealed the decision to the Competition Appeal Tribunal, while the OFT launched a second case against the revised charging structure, called interchange fees.

The original case reached the Competition Appeal Tribunal (CAT), but earlier this week the OFT was requesting the withdrawal of its original case so that it could concentrate resources on its new case. Amid debates about the acceptability of that practice the CAT quashed the case with the consent of the OFT.

"We applaud the CAT's action to quash the OFT decision," said MasterCard's General Counsel Noah J Hanft. "MasterCard has always maintained that these interchange fees, and the manner in which they were established, were entirely lawful because, among other things, they enabled MasterCard's credit card business in the UK to compete effectively with other payment providers."

The OFT claimed that its move was down to a desire to address current, and not historic, arrangements. "It is in the best interests of consumers and businesses to see this problem addressed quickly through focussing on current fees rather than historic ones," said OFT chief executive John Fingleton.

"We still believe that collectively agreed interchange fees go against the principles and letter of competition law and are harmful to consumers who see higher prices as a result," he said.

MasterCard's fees used to be set by member banks, prompting one of the OFT charges. They are now set by MasterCard headquarters independently of the member banks, removing one of the bases of the OFT case.

MasterCard has asked for costs in the case. "While we are pleased that the OFT has finally walked away from what was an ill-considered case, it is unfortunate that it took the OFT nearly six years to realise the weakness of its case," said Hanft. "MasterCard has, therefore, asked the CAT to award it costs in connection with the appeal."