Fabian Demicoli

MIF regulation would benefit businesses and consumers across the EU


The European Commission is
expected to publish proposals concerning the fees charged on payments using
electronic cards. The card scheme MasterCard has been pursuing an aggressive
media campaign against such regulation. EuroCommerce calls on the European Commission
not to be pressurized: all European businesses and consumers need and deserve
strong regulation against these fees.

 

 Christian Verschueren, Director-General of
EuroCommerce said, "These fees, which only benefit the banks, are wholly hidden
from consumers but increase the price of all goods and services whether or not
a card is used to pay. Many cards also carry ‘free gifts' such as air-miles or
money-off coupons. But these gifts are not free. All consumers pay for them
through the hidden interchange fees."

"Much
consumer complaint has come from the practice of surcharging," commented
Christian Verschueren. "But retailers would rather not surcharge: they are
forced into it because of the huge costs associated with payments by credit
card. The removal of this cost burden would allow merchants to offer lower
prices and better services to all consumers."

 

The fees, known as multi-lateral
interchange fees (MIFs), are interbank fees charged on most card transactions.
They do not correspond to cost and, for some debit and most credit cards, they
are charged as a percentage of the price – up to 2% in some countries. They are
borne directly by merchants but ultimately increase costs for all consumers.

MasterCard's MIF system
has been condemned, by the European Commission, as a price-fixing cartel in
breach of European competition law. The European Court upheld the decision
against MasterCard, finding that MIFs are not necessary for the card schemes to
function and that they distort competition across the whole payment market.
Some progress has been made on cross-border fees through the competition cases.
But regulation is needed urgently to address domestic MIFs which remain
unjustifiably high.

EuroCommerce urges the European
public not to be misled by media articles which claim consumers would suffer if
the MIF system were subject to regulation: the opposite is true. All consumers
would benefit. It is in the nature of the retail business to be highly
competitive: this fact alone would dictate that savings made by the sector on
MIFs would be passed on to consumers.

The current MIF system,
and associated card scheme rules, also act as barriers to new payment operators
entering the market. If these barriers were removed, new providers could offer
effective competition with new payment methods. This, in turn, would also
reduce costs to the benefit of retailers and consumer alike. The ultimate
benefits would be an expansion of cross-border and e-commerce trade which would
bring new goods and services to consumers at more competitive prices.

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