Visa gets a rap on the knuckles from the OFT

Visa gets a rap on the knuckles from the OFT

	Published : Thu, 20 Oct 2005 13:05 By : Paula Demarzio Print this Story

The Office of Fair Trading (OFT) announced on Wednesday that it had reasons to believe that UK shoppers were being overcharged by the credit card company. It accuses Visa and the major banks for entering into "anti-competitive" agreements.

This is the first formally raised objection against Visa, the UK’s largest credit card organisation. According to the agreement between Visa and Britain's banks, when a consumer buys goods using a credit card, a percentage of the purchase price is paid by the retailer. The ‘interchange fees’, which is the charge paid when a retail transaction is carried out using a card, is passed on to the retailers and eventually to the consumers who end up paying disproportionately high prices.

The OFT issued a "statement of objections" against Visa after going through its agreement last year. Visa has been asked to respond early next year. This is an effort by OFT to force Visa to cut its fees or face heavy fines. An OFT statement said that it was “an indication of what our thinking is, not a final decision”.

Visa defended itself by saying that it was surprised. According to the credit card organisation, it reached an agreement three years ago with the European Commission to slash its interchange fee to 0.7 percent by the year ending 2007. Managing director of Visa UK, Colin Grannell, said their company was concentrating on achieving that target across Europe including Britain. He added: "So for the OFT to say the rates are unduly high clearly is at odds with the Commission's position on how we calculate interchange,"

Earlier last month, OFT had issued a similar ruling against Visa’s rival MasterCard for charging consumers with an ‘illegal tax’ of around £100m a year. Though MasterCard had consequently brought about changes in its charging structure of the interchange fees, OFT was still not happy. It said that it could launch a fresh investigation against them again.

Legal counsel to Visa, Hugh Stokes said the company would reply to these charges "in the normal way". Otherwise, it said it might seek judicial intervention if the OFT formally ruled against the company.