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
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 (see note 4).
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.