OFT: MasterCard agreement anti-competitive

The OFT has found that a collective agreement between members of MasterCard UK Members Forum (MMF)restricted competition.

14:25 06 September 2005

The OFT has found that a collective agreement between members of MasterCard UK Members Forum (MMF), including most major banks, restricted competition and infringed Article 81 of the EC Treaty and the Chapter I prohibition of the Competition Act.

The agreement set 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 1st March 2000 and 18th November 2004.

In 2004, over 700 million purchase transactions were made in the UK using MasterCard cards with a total value of 42.7 billion. An interchange fee was charged on each of these transactions as a percentage of total transaction value.

The OFT has found that the MMF MIF agreement had adverse effects on competition within the MasterCard scheme and also in relation to other payment systems.

Sir John Vickers, OFT chairman, said: "The parties to this collective agreement set the interchange fee to derive revenues from retailers and their customers over and above the costs of providing the payment services. This unduly high interchange fee was like a tax on UK consumers."

MasterCard introduced new arrangements for setting the interchange fee on 18th November 2004; they currently apply to all UK MasterCard transactions.