EU threatens Mastercard with fine

MasterCard, the world's second-largest credit card group, could face a fine of up to €230m (£159m) after the EU accused it today of anti-competitive behaviour by fixing the fees millions of retailers must pay for accepting its payment cards.

The European Commission, in a further flexing of its pro-consumer muscles, said it had sent a supplementary "statement of objections" to MasterCard which also owns the Maestro debit card brand. It first accused the group and its bigger rival, Visa, of restrictive practices through pre-determining "cross-border interchange fees" in September 2003.

MasterCard, which issues 45% of all credit and debit cards in Europe, is also being investigated by Britain's Office of Fair Trading as, spurred by Neelie Kroes, EU competition commissioner, regulators mount a crusade against anti-competitive behaviour in the EU's financial services sector.

The EU credit card sector alone is worth €1350bn, with €23bn payments made a year, while MasterCard is used by 24m merchants in 210 countries.

Ms Kroes, who has accused Visa and MasterCard of making "outrageous" profits and operating a closed shop, has launched a full-scale inquiry into pan-European payments in a drive to open up competition and cut prices. The credit card investigation is separate but parallel.

The commission said MasterCard's interchange fees - the price paid by retailers to issuing banks - applied to all cross-border transactions in the EU and domestic transactions in nine member states. Its objections, it added, were preliminary.

Before it decides whether the group has violated EU competition rules, it may first face a direct challenge at an oral hearing. It has powers to ban the interchange fees and impose a fine of up to 10% of MasterCard's turnover of €2.3bn in 2005.

The group, previously owned by a consortium of banks, floated in New York last month and has said it had expected the statement of objections as part of the EU's inquiry. Ultimately, the case could end up in the European Court of Justice, Europe's highest court.