European Commission to rule MasterCard fee illegal: report

Mumbai: The European Commission, the executive arm of the European Union, has found that MasterCard's method of charging fees for international purchases violates EU antitrust rules, reports quoting sources familiar with the situation said.

While the "interchange fees" that MasterCard currently charges are not valid, the European Commission may accept another method of computing them, the report said. Competition commissioner Neelie Kroes said the current system rips off consumers.

The US card firm sets many fees on shops and other service providers for each MasterCard purchase, which average around one per cent of the purchase price.

The seller's bank then pays the "interchange" fee to the cardholder's bank.

Retailers complain that they are forced to spend billions of euros on the interchange fee that includes provision for non-payment, fraud, promotions and free credit.

The EC wants MasterCard to design a different interchange fee plan, the report added.