New Zealand regulator alleges price fixing of interchange fees

New Zealand regulator alleges price fixing of interchange fees

New Zealand's financial watchdog has initiated legal action against Visa, Mastercard and 11 financial institutions for allegedly fixing the interchange fees charged on card transactions.

In a Statement of Claim filed in the Wellington High Court, the New Zealand Commerce Commission alleges that the fixing of interchange fees is anti-competitive.

In addition to Visa and MasterCard, the claim was filed against Cards NZ, ASB, Bank of New Zealand, Westpac, ANZ, TSB, Kiwibank, HSBC, NZ Post, The Warehouse Financial Services and GE Finance and Insurance.

Interchange fees are charged by card companies and are paid by retailers as part of their bank transaction charge. The fee is up to 1.8% of each credit card transaction. However retailers cannot charge customers extra for card payment and so recover the fees by increasing prices, regardless of whether customers pay by card or cash.

"The Commission does not allege any collusion between Visa and MasterCard. The alleged price-fixing is between Visa and its shareholder financial institutions, and between MasterCard and its member financial institutions," the regulator says in a statement.

Visa said the move by the Commission is "serious and disappointing" and it would defend the system. MasterCard called the action "unjustified, inappropriate and an unnecessary intrusion".

Under New Zealand's consumer law companies found guilty of price-fixing can be fined up to $10 million per breach, or three times the commercial gain resulting from the breach, or 10% of a company's turnover.

There are currently dozens of anti-trust lawsuits filed by US retailers and trade groups such as the National Association of Convenience Stores against Visa, MasterCard and card issuing banks in the US over the setting of interchange fees.

Both Visa and MasterCard are also being pursued by EU anti-trust authorities over the setting of interchange fees in the European markets.

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