UPDATE: MasterCard To Temporarily End Some Interchange Fees
16 minutes ago - Dow Jones News
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As of 12:41 PM ET 6/12/08
(Updates with comment from the European Commission in the sixth paragraph, fresh stock quote.)
DOW JONES NEWSWIRES
MasterCard Inc.'s (MA) European operations are temporarily abolishing certain fees levied on credit- and debit-card transactions to comply with a December ruling from the European Commission as the company continues its appeal.
While complying with a June 21 deadline to repeal its intra-European Economic Area cross-border consumer card interchange fees, MasterCard said it will continue discussions with the commission for an agreement about an interchange fee methodology.
The European Commission ruled MasterCard effectively acts as a cartel by setting the fees its member banks charge one another to move money between the accounts of shoppers and merchants, which unfairly raises consumers' retail prices. The commission ordered the fees abolished within six months, warning MasterCard that it faces fines of around $350,000 a day if it failed to comply.
"We have solid legal arguments supporting our appeal of the decision to the European Court of First Instance, and we will continue to vigorously pursue that appeal," MasterCard Europe President Javier Perez said. "MasterCard believes that its cross-border interchange system has kept the cost of payment cards low for cardholders, and if left unchallenged the Commission's decision will be bad news for European consumers."
Perez also said the transactions affected amount to less than 5% of MasterCard Europe's volume and it doesn't see any significant near-term financial impact as a result of the suspension.
Following MasterCard's move Thursday, the European Commission said in a statement that the card-issuer has yet to come up with a viable alternative fee method since the commission's December ruling, but it will continue working with MasterCard on reaching an agreement.
MasterCard has said the fees are necessary to encourage banks to issue more cards. But retailers have long complained about these interchange fees, saying they eat into slim margins and raise prices for shoppers. Their EU lobbying group estimates that banks in Europe reap 10 billion euros a year in such fees.
In the U.S., both Visa Inc. (V) and MasterCard have faced lawsuits from retailers alleging that the card networks violate American antitrust laws, but the cases haven't been resolved. Interchange fees also have been attracting scrutiny from the U.S. government, with congressional lawmakers holding hearings and the Justice Department's antitrust division investigating the fees.
The EU case doesn't affect American Express Co. (AXP), which operates a so-called three-party system. Both cardholder and merchant deal directly with American Express without the need for interchange fees.
MasterCard shares recently traded up 2.5% at $286.28.
-By Lauren Pollock, Dow Jones Newswires; 201-938-5964; lauren.pollock@dowjones.com
(Charles Forelle of The Wall Street Journal contributed to this report.)
(END) Dow Jones Newswires
06-12-08 1224ET
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