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Further settlements expected in credit card fee dispute

MasterCard has paid out $61m (£39m) to Tesco in the first of an expected wave of out-of-court settlements over credit and debit card interchange fees.

Tesco is one of 20 UK retailers to commence legal action against MasterCard in 2013, alleging historic overpayment of “anti-competitive” interchange fees. The others are believed to include Debenhams, House of Fraser, Asda, Next, Arcadia Group and New Look.

MasterCard said it decided to settle to “avoid the cost and distraction of litigation and the uncertainties that are inherent in such cases”.

It added: “MasterCard now looks forward to working with Tesco as a key partner in the UK to further encourage the use of convenient, safe and secure electronic payments in its stores.”

Stephen Sidkin, chair of the fashion law group at law firm Fox Williams, said: “I’m not surprised the case has been settled out of court and I would expect the other 20 retailers pursuing MasterCard will also settle. It’s a better outcome for the credit card company as it saves time, money and bad publicity.”

He added: “It will be interesting to see if Inditex and H&M, the two largest fashion retailers in Europe, go after MasterCard and Visa in their home countries.”

Retailers have long argued that interchange fees, which are set by MasterCard and Visa, are disproportionate to the cost of processing transactions.

Arcadia, Asda and Morrisons are among those to have filed suit against Visa over the fees.

On July 9, European Union officials sent MasterCard a formal complaint over its “artificially high” payment fees.

“We have concerns both in relation to the rules MasterCard applies to cross-border transactions within the EU, as well as the fees charged to retailers for receiving payments made with cards issued outside Europe,” said EU competition commissioner Margrethe Vestager.

MasterCard said it is working with the European Commission and would formally respond to the complaint in due course, although it did not offer a timescale.  

In March the European Parliament voted in favour of an EU-wide cap on debit and credit card interchange fees, which will be rolled out to the UK this autumn.

@KirstyMcGregor

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