Commerce commission drops action against HSBC over credit cards

By NZPA

Wednesday 28th March 2007

The Commerce Commission said today it had dropped action against HSBC over alleged price fixing of interchange fees involving credit cards but was proceeding against other financial institutions and credit card companies Visa and Mastercard.

The watchdog in November issued proceedings against HSBC, Visa, Mastercard and nine other financial institutions that are members of the Visa and Mastercard schemes.

HSBC said it is not involved in credit card issuing or acquiring markets in New Zealand. To the extent that it is a member of the Visa scheme, HSBC agreed to abide by any decision of the High Court affecting it.

The commission agreed HBSC had limited involvement and it and other defendants agreed to HSBC's release from the proceedings.

The commission had confirmed it would not seek any financial penalty against HSBC, and HSBC had agreed to abide by any decision of the court in relation to the proceedings.

As the matter was before the courts, the commission said it would not comment further.

Interchange fees are charged by credit card companies to retailers as part of the fees they pay to banks. The fee is up to 1.8% of each credit card transaction.

The card companies, as a condition of allowing retailers to offer credit card transactions, forbid retailers charging customers extra to use credit cards. Retailers therefore must recover the fees by increasing prices, regardless of whether customers pay by credit, cash or eftpos.

The companies involved are Cards NZ, Visa International, MasterCard International, ASB, BNZ, Westpac Banking Corp, Westpac NZ, ANZ, TSB, Kiwibank, NZ Post, The Warehouse Financial Services and GE Finance and Insurance.

Seven major retailers have joined the commission in its case including supermarket chain owners Foodstuffs and Progressive Enterprises plus Dick Smith Electronics, Farmers, Noel Leeming, Whitcoulls and Mississippi.

Transactions on Visa cards and MasterCard cards totalled $19 billion in 2004, with 2.1 million Visa cards and 900,000 MasterCard cards in use.

The Commerce Act provides for penalties for price-fixing of up to $10 million per breach, or three times the commercial gain resulting from the breach, or 10% of a company's turnover.

The commission does not allege collusion between Visa and MasterCard.

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