EU gives MasterCard six months to cut fee

By Huw Jones

BRUSSELS (Reuters) - MasterCard (MA.N: Quote, Profile, Research, Stock Buzz) has six months to change its fee structure for international card transactions or face daily fines, according to an EU ruling that retailers said would save consumers billions of euros a year.

The European Union's executive European Commission said that for 15 years MasterCard's multilateral interchange fee (MIF) on cross-border payment card transactions using MasterCard and Maestro cards violated EU rules on fair competition.

"Multilateral interchange fee agreements such as MasterCard's inflate the cost of card acceptance by retailers," EU Competition Commissioner Neelie Kroes said in a statement on Wednesday.

"Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices paid not only by card users but also by customers paying cash," Kroes said.

MasterCard said it would appeal the decision to European Union courts and had "strong grounds" to challenge the decision.

The company said its decision to appeal was "based on its firm conviction that market forces, not regulation, should drive key decisions such as the setting of interchange fees".

EuroCommerce, which complained to Brussels about MasterCard's fees, said consumers will enjoy lower prices.

"At this stage it only applies to cross border payments but there is little doubt every consumer in every country will demand their governments institute the same steps in weeks," EuroCommerce President Feargal Quinn told Reuters.