February 2, 2006

The Office of Fair Trading (OFT) announced today that it has launched a new investigation into the credit card association, MasterCard.

The OFT suspects that MasterCard has infringed the Competition Act by restricting competition by MasterCard’s “interchange fees”

An “interchange fee” is what the retailer pays the bank every time a purchase is made.

It is alleged that interchange fees, which raise prices, were excessive and are compared to an extra tax on consumers.

There was an earlier probe last year which found that the fees charged by MasterCard were excessive and pushed up prices unfairly.

After last years findings MasterCard altered its charging system, however, the new system still does not satisfy the OFT.

Visa, the other major credit card association, came under a similar scrutiny in October 2005.

It is estimated that interchange fees amount to 1.1% of all purchase prices