The European Commission has sent out a warning signal to credit card companies across Europe, hinting that it will legislate if competition in the sector does not improve.
According to a preliminary report published by the European Commission on its sector inquiry into the payment cards industry, businesses and consumers are not yet benefiting from a fully competitive Internal Market in payment cards.
The report finds numerous barriers including technical obstacles and practices that may raise costs for entrants.
The industry, consumers and other interested parties have ten weeks (until 21 June) to submit their views and comments on the preliminary findings.
“If the preliminary findings on payment cards are borne out by this consultation, the Commission will consider action under EC Treaty antitrust rules in individual cases,” the Commission said in a press release.
“In addition, the results of the sector inquiry will feed into the Commission’s analysis of whether amendments to the regulatory framework for payment cards are necessary.”
The Commission will publish in July a report on the second part of its retail banking inquiry – focusing on current accounts and financing of small firms.
Competition Commissioner Neelie Kroes said: “The payment cards industry in Europe remains national and some local players are preventing competition from developing. This pushes up payment card costs for consumers and businesses. Competition law and sector regulation must work together to create a better environment for business.”
The European payment cards industry is large and provides the means for a significant part of consumer payments in Europe. A total of 23 billion card payments are made annually in the EU with an overall value of EUR 1,350 billion (EUR 1.4 trillion).
The Commission noted the following indications that markets are not yet competitive.
*Large price differentials within the Single Market. Consumers pay 100% more in some countries and fees for business vary up to 650%.
*The high and sustained profitability of the card payment industry.
*Card acceptance fees are used to “tax” sales at business outlets.
*Small and medium enterprises pay higher fees than large ones.
The Commission also listed a range of structural and technical barriers to competition, including the fact thatin 8 member states banks deal jointly with retailers instead of competing, giving retailers just one offer for the network concerned.
