European consumers and businesses are paying too much to use their credit cards such as Mastercard and Visa in a sector that is still national, the European Commission said in a report yesterday.
Depending on where customers live, they could pay up to double in annual fees for a Mastercard or Visa card, for no apparent reason.
Likewise, the fees businesses pay to take each payment from customers also vary in the region so that in some countries they can be charged six times the fee levied in others.
The Commission will consider taking action against companies if it finds they have broken European rules.
"The payment cards industry in Europe remains national and some local players are preventing competition from developing," Competition Commissioner Neelie Kroes said in a statement on the preliminary report.
"This pushes up payment card costs for consumers and businesses."
A total of 23 billion card payments are made each year in the European Union for purchases that amount to 1.35 trillion euros, and credit card companies, the report notes, make high and consistent profits.
The report is part of a wider EU investigation into competition in the banking retail sector.
It is part of the Commission's work to create a single internal market for financial services in the 25-member bloc.
One of its aims is also to help the Commission establish a Single Euro Payment Area in the euro zone to let Europeans pay as securely, quickly, and efficiently abroad as they do at home.
The report said businesses suffer as they are charged by credit card companies for each customer purchase, which leads to the retailers raising their own prices.
Also, banks in eight EU member states create joint marketing ventures offering retailers the same prices to accept purchases by card, instead of competing against each other so retailers can choose.
Visa and Mastercard have already come up against the Commission over their fees, which the highest European anti-trust authority said broke competition rules.
In 2002, Visa, the world's largest credit card association, agreed to cut fees after the Commission investigated its business practices.
Mastercard is embroiled in a similar case with the EU executive.
The retail banking inquiry is part of the Commission's drive to prise open cross-border markets, increase competition and liberalise sectors.
After a similar investigation in the energy sector, Kroes warned gas and electricity suppliers they will face an anti-trust crackdown because they were slow in opening the market. ..SUPL: