BRUSSELS (06/15/2000) - It will take the European Commission until the end of this year to complete an ongoing investigation into possible antitrust violations by the credit card industry, a Commission spokesman confirmed Thursday.
The investigation is much broader than the U.S. focus on Visa International Inc. and MasterCard International Inc. because it delves into practices used by companies across the European Union and was prompted by concerns that through collusive pricing practices the industry is not only gouging consumers but is also preventing the entry of newcomers in to the market.
As a result, the investigation covers both the payment system between banks and card handlers and the relationship including fees between card companies and retailers, said Amelia Torres, spokeswoman for European Competition Commissioner Mario Monti.
The inquiry is not similar to the inquiry underway in the U.S. because the European Union has already banned the practice under review in the U.S. -- namely, the practice that bank members of Visa and MasterCard may not issue competing cards, Torrres said. The Commission in fact warned Visa back in 1996 against exporting the practice to the EU after American Express Co. filed a complaint in Brussels. As a result, Amex has been able to market its cards in Europe through the banking system, while in the U.S., it is still limited to direct marketing.
Also in 1996, the Commission warned the entire industry that the practice, under which card companies ban retailers from charging customers for using debit and credit cards, may be abusive according to EU law. However, the Commission at that time ended up putting that investigation on hold, over concern that consumers would in fact be the losers if the ban were repealed.
But retailers have continued to argue however that the ban forces them to meet the entire costs of the credit card payment processing and that competition among card companies and banks would be enhanced if the rule was scrapped altogether.
The ban was imposed by card companies in order to ensure that consumers would not discriminate against using credit or debit cards due to their extra cost.
The industry wants to preserve this so-called non-discrimination rule.