EU rules on $70m unlawful credit card charges

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**EXCLUSIVE** A decision of the European Commission this week has declared unlawful certain charges for cross-border retailers relating to a restrictive "collective price agreement" between VISA's constituent banks

On Tuesday the Commission ruled that retailers have been overcharged for many years, a finding that opens the doors to back payment of $70m for travel retailers alone according to one estimate.

The retailer's bank or financial institution pays a Merchant Service Charge (MSC) to the card holders bank for each unit card transaction. Within this charge is the Multilateral Interchange Fee (MIF), which is paid between banks when the cardholders bank and the retailers bank are different. The MIF is some 90% of the MSC charge and is set in secret by Visa. However the investigation of the Commission found that it is not paid by the banks to eachother, although banks always pass this charge to the retailer by hiding the MIF within the MSC. It is estimated this represents an average charge of 1.25% to retailers on all the millions of transactions in the European travel-retail industry every year.

Kappe International hosted a forum of operators at the TFWA World Exhibition yesterday to explore the possibilities for retailers. Any action on the VISA ruling also sets a precedent for Mastercard and other card providers where the Commission is poised to launch a new investigation. Some duty-free operators said there was an opportunity to join forces with domestic market retailers to combat the MIF fee itself. This would remove a significant cost burden to European travel retail, worth $80m per year to retailers in the region generally. The total volume of VISA's European transactions amounts to $680bn.

In 2000 at the start of the investigation EU Competition Commissioner Mario Monti said "Merchants ought not to be de facto forced by the card companies and the banks to foot a bill for transactions made with cards, which of course carry a cost."

Graham Austin, director of lobbying group GBat Beckenham said "After being forced onto the defensive since before 1999, the Commission decision could provide the industry with an opportunity to show it is not a soft target. It has teeth of its own."