MasterCard stands accused of "taxing" consumers

It is six years into a probe of the "interchange fee" that Mastercard issuing banks charge retailers to recover the costs of the card system.

The OFT claims the fee is too high and acts as a "tax on UK consumers".

It will now concentrate on a second action focusing on Mastercard's current interchange fees policy rather than the past charges.

Quick judgement

Prior to November 2004, Mastercard's UK credit card interchange fee was set in conjunction with issuing banks, but since then it has changed its policy and sets the fee independently.

The OFT said that, in light of this change, it had asked the Competition Appeal Tribunal to drop its first ruling against Mastercard, made last September, so it could concentrate on reaching a quicker judgement against Mastercard's new interchange fee system.

It claims that the interchange fee is still set too high in order to enable banks issuing Mastercards to recover some extra costs, such as those incurred by offering standard interest-free periods.

The OFT hopes to have issued a new statement of objections against Mastercard and rival card issuer Visa's own interchange fees by spring 2007.

Mastercard welcomed the OFT's decision to abandon the first investigation and said any further proceedings would be "fruitless".

If the two card issuers are eventually found to have breached UK competition law they can be hit with massive fines - up to 10% of their annual worldwide turnover.