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Press releases 2004
OFT issues statement of objections on MasterCard agreement
184/04 10 November 2004
The OFT has issued a further statement of objections (see notes 2 and 3) against MasterCard UK Members Forum Limited's agreement on the multilateral interchange fees applicable to UK domestic transactions (the MMF MIF agreement), contained in their UK Domestic Rules.
The statement sets out the OFT's proposed findings to the effect that parties to the MMF MIF agreement have infringed competition law. The parties now have a further opportunity to make written and oral representations which the OFT will take into account before making a final decision.
The OFT proposes to find that the current agreement between members of MasterCard UK Members Forum Limited on common fees charged between banks on transactions taking place in the UK using a UK-issued MasterCard infringes Article 81 of the EC Treaty and the Chapter I prohibition of the Competition Act 1998. The OFT believes that the agreement leads to an unduly high fee being paid to card issuing banks on every such transaction. The cost of these fees is passed on to retailers and ultimately to consumers.
MasterCard originally notified the UK Domestic Rules to the OFT for consideration as to whether they infringed the Competition Act and, if so, whether an individual exemption could be granted (see note 1). As of 1 May 2004, as a result of changes to the Competition Act (see note 2), the notification has lapsed. The investigation, however, continues as the OFT believes the agreement has an anti-competitive effect. The statement of objections takes into account the new regime (including that the OFT now has the powers to apply Article 81 of European competition law in addition to the Chapter I prohibition in UK law), as well as dealing with arguments and evidence put forward by the parties to the MMF MIF agreement and third parties since the OFT last issued proposed findings, in February 2003.
The OFT has also launched an investigation into the agreement on the multilateral interchange fees applicable to UK transactions using Visa cards.
NOTES
1. MasterCard UK Members Forum Limited, formerly known as MasterCard/Europay UK Limited, comprises the major UK banks that issue MasterCard payment instruments and which are licensed to use the trade and service marks of MasterCard in the UK. The purpose of the Forum is to enable its members as issuers of the MasterCard payment instruments and/or acquirers of transactions undertaken using such instruments, to liaise over issues relating to the development of the payment schemes. The Forum is responsible for the adoption of rules specific to the UK (the UK Domestic Rules). On 1 March 2000 it notified its Memorandum and Articles of Association and the UK Domestic Rules, including its rules on interchange fees, to the OFT.
2. The EC Treaty and the Competition Act 1998 both prohibit anti-competitive agreements. Article 81 of the EC Treaty ('Article 81') and the Chapter I prohibition of the Competition Act ('the Chapter I prohibition') apply to agreements which prevent, restrict or distort competition. EC Regulation 1/2003 ('the Modernisation Regulation'), which entered into force on 1 May 2004, requires the OFT, as a national competition authority of a Member State, to apply Article 81, as well as the Chapter I prohibition, when the Chapter I prohibition is applied to agreements which may affect trade between Member States. The Competition Act was amended, with effect from 1 May 2004, to provide the OFT with the necessary investigation and enforcement powers for the application of Article 81.
When the OFT gives notice to parties of a proposed decision, under section 31 of the Competition Act and Rule 14 of the Competition Act 1998 (Director's rules) Order 2000 (the 'OFT's rules'), it now refers to such notice as a 'statement of objections' rather than a 'Rule 14 Notice'.
3. The OFT previously issued Rule 14 Notices in this matter in September 2001 (see statements 2001) and February 2003 (see statements 2003). The present statement of objections takes into account the arguments put forward by the parties and third parties since February 2003.
4. The OFT has reasonable grounds for suspecting that the agreement between Visa members on multilateral interchange fees appreciably prevents restricts and/or distorts competition for the purposes of the Chapter I prohibition and Article 81. No assumption should be made, however, that there has been an infringement.
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