Thursday, February 01, 2007

"American Merchants Welcome Today's EU Report Calling for Closer Scrutiny of Interchange Fees" (MPC)

WASHINGTON, Jan. 31 - The Merchants Payments Coalition (MPC), an organization representing retailers, online merchants, and other businesses that accept credit and debit cards, welcomed today's release of a European Union (EU) policy report that calls for closer scrutiny of competition in the European retail banking sector.

The European Competition Commission report expressed concern about a number of practices the Commission believes could limit competition in the credit card business. Among the practices that worry the Commission is the "interchange fee" that banks and credit card companies charge merchants every time a credit or debit card is used to make a purchase.

"The EU Commission's conclusion that interchange fees should be the subject of further antitrust inquiries is a big win for the European merchants and consumers who are still forced to pay these hidden fees," said Mallory Duncan, chairman of the MPC and senior vice president and general counsel at the National Retail Federation. "The card companies set their fees in secret and won't even allow merchants to disclose them to consumers. Both here and in Europe, interchange remains the biggest fee consumers have never heard of," Duncan added.

The Commission report calls for closer examination and continued scrutiny of interchange fees to make sure that they are transparent and set fairly "as a result of competitive outcome."

"It is clear that the present level of interchange fees in many of the schemes we have examined does not seem justified," European Commissioner for Competition Policy Neelie Kroes said after releasing the report. "Customers already pay the cost of interchange fees, since retailers pass them on in higher retail prices, paid not only by card users but also by customers paying cash. So reducing these fees would, on balance, benefit consumers." Kroes added.

Interchange fees vary with type of merchant, transaction and card, but average close to two percent for most credit card transactions. In the United States, interchange fees totaled $30.7 billion in 2005, up 17 percent from 2004 and 85 percent since 2001.

European merchants groups have expressed concern that their expenses will increase significantly if Visa and MasterCard are allowed to charge interchange fees the same way they do in the United States. According to MPC chairman Duncan, "Europeans may disagree about a lot of things, but they appear united in their opposition to hidden interchange fees."

In the United States, Visa and MasterCard are already facing antitrust litigation arising from the way they set interchange fees. In 2006 the Senate Judiciary Committee held a hearing on interchange fees and Senate Banking Committee Chairman Chris Dodd (D-CT) has announced plans to do the same.

The MPC, a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards are fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.

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[Source: PR Newswire via Merchants Payments Coalition]