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The Commerce Commission has issued civil proceedings against Visa, MasterCard and 11 financial institutions for alleged price-fixing in relation to interchange fees.
The commission said it filed a statement of claim in the High Court in Wellington yesterday, alleging that fixing the interchange fees was anti-competitive.
Interchange fees are charged by credit card companies. They are paid by retailers as part of the fees they pay to banks. The fee is up to 1.8 per cent of each credit card transaction.
Retailers are not permitted to charge customers extra to use credit cards, and so must recover the fees by increasing prices, regardless of whether customers pay by credit, cash or eftpos.
The commission said it did not allege any collusion between Visa and MasterCard. The alleged price-fixing was between Visa and its shareholder financial institutions, and between MasterCard and its member financial institutions.
As the matter was before the courts, the commission would not be commenting further.
Companies the commission alleged had been involved in anti-competitive arrangements relating to the fees include: Cards NZ Ltd, Visa International, MasterCard International Inc, ASB, BNZ, Westpac Banking Corporation, Westpac NZ Ltd, ANZ, TSB, Kiwibank, HSBC, NZ Post, The Warehouse Financial Services Ltd and GE Finance and Insurance.
Transactions on New Zealand Visa cards and MasterCard cards totalled $19 billion in 2004, with 2.1 million Visa cards and 900,000 MasterCard cards in use, the commission said.
The Commerce Act provided for penalties for price-fixing of up to $10 million per breach, or three times the commercial gain resulting from the breach, or 10 per cent of a company's turnover.
Visa International's executive vice president for Australia and New Zealand Bruce Mansfield said Visa would be defending its position.
Visa International's payment system delivered benefits to over a billion card holders worldwide, including close to two million in New Zealand, and its fundamentals would be defended, Mr Mansfield said.
"The move by the Commerce Commission is serious and disappointing. We will defend the system that continues to deliver major benefits to all New Zealanders."
The Visa system had been operating successfully for over 30 years and had brought enormous economic and social benefits to consumers and merchants worldwide, he said.
Visa described itself as the leading payment brand in New Zealand with 1.8 million cards on issue and more than 115,000 merchant acceptance locations.
For the 12 months ending June 2006 more than $15 billion was spent at point of sale or withdrawn from ATMs in New Zealand using Visa cards.
MasterCard issued a statement today saying it was disappointed with the commission's action and would contest the claims vigorously.
MasterCard had unilaterally set interchange fees since September 2003. The fees were not charged by MasterCard, rather they were payable between financial institutions who were parties to a card transaction.
MasterCard said it opposed the commission's actions as unjustified in law and as an inappropriate and unnecessary intrusion into a highly competitive payments market.
Leigh Clapham, executive vice-president for MasterCard, Australasia, said MasterCard initiated discussions about its interchange fee arrangements with the Commerce Commission in 2003 and had co-operated fully with the commission's investigations since then.
MasterCard was astonished by the commission's lack of engagement during its lengthy investigation, he said.
Although MasterCard had fully explained its rules and fees, at no time during the investigations did the commission explain the reason for its concerns.
The legal action announced today by the commission did not reflecting the vigorous competition that existed between various payment systems in this country.
Interchange fees were critical to the efficient operation of the four-party payment systems, such as MasterCard's, which delivered clear benefits to both cardholders and merchants.
- NZPA
