French Banks Offer To Cut Payment Card Fees to Resolve Price-Fixing Allegations

A consortium of 130 financial institutions operating the leading interbank network in France is offering to lower most interbank fees for card transactions in order to resolve a price-fixing investigation by the French Competition Authority.

Groupement des Cartes Bancaires (“CB Group”), whose network accounts for more than two thirds of all card transactions in France, are offering to lower the fees to settle the Authority’s investigation into allegations that the fees were the result of anticompetitive price-fixing between member banks.  The investigation was triggered by complaints lodged with the French competition agency in 2009 and 2010 by two leading trade associations representing France’s retail industry.

The Authority stated in a press release that it was not necessarily illegal for the CB Group to collectively set interbank fees for card transactions within its network.  However, the level of these fees must be based on objective justifications, such as security or interoperability requirements.  The competition watchdog noted that the Group had not provided sufficient data to justify the fees’ current levels, and that some of the fees had remained unchanged for over two decades, in spite of changes to the competitive landscape and a vast increase in the use of payment cards over that period of time.

Details of the Group’s proposed commitments have been posted on the Competition Authority’s website to allow interested parties to submit comments, pursuant the so-called “market testing” procedure, which will close on May 5, 2011.  Under the plan, interbank fees for card payments would be cut by 25%, while the fees for withholding cards would be reduced by 50%.  ATM withdrawal interbank fees, however, would remain at their current level.  If accepted by the Authority, the commitments will remain in force for a 5-year period.