EU tells retailers to take on high credit card fees

Retailers should take on high credit card fees by telling customers how much they really cost or by launching their own EU-wide card networks, the EU's antitrust chief Neelie Kroes said Monday.

Fourteen of Europe's biggest retailers _ including furniture chain Ikea and supermarkets Tesco, Carrefour and Asda-Wal-Mart _ have complained loudly about the amount they hand over to credit card payment networks MasterCard and Visa to process customer payments.

Last month, Kroes ordered MasterCard to drop crossborder card fees within six months or face huge daily fines, also warning Visa that she would this year reopen a probe into its charges.

She told a closed meeting of retailers on Monday that they could take action against high payment fees, suggesting that big shops should show customers the real cost of using more expensive payment methods.

"Why should customers paying with debit cards or cash subsidize customers who pay with expensive credit cards?" she said in prepared remarks distributed by her office. "By saying this, I am aware I am opening the whole debate about surcharge, additional fees to be paid when you use an expensive payment instrument."

"You too, as retailers, have a role in informing the consumer about the cost of the various payment instruments," she said. "Information is the starting point for competition."

Retailers have usually been coy about the cost of using cards, saying some of their agreements with Visa and MasterCard prevent them from disclosing these different costs to shoppers.

But some have already struck out. Ikea's British branches slap a surcharge on credit card payments to reflect the higher costs _ such as a percentage of the overall transaction _ that they pay to the card networks.

This has led to many customers picking less expensive debit cards to purchase their flatpack shelves and sofas.

Kroes also urged them to speak out in other ways, such as giving the right price signals to consumers promoted cheaper payment methods.

Above all, retailers should reduce prices if and when MasterCard and Visa cut their fees, she said, countering card networks' arguments that eliminating fees would not change anything.

"It is therefore in your own interest to pass cost savings straight on to consumers. In this manner you will contribute to ensuring that interchange fees will further be reduced, to everyone's advantage," she said.

She also called on them to look at the example set by U.S. retailer Discover in the 1980s and launch their own card payment brand to rival the MasterCard and Visa duopoly.

Retailers should seize the initiative by loudly supporting alternatives, she said, suggesting that that shops could help expand the current debit card programs they use in one country by extending them to other EU nations.

British supermarket chain Tesco complains that it pays 100 million pounds (US$196 million; euro132 million) a year to process card payments, money that it says it cannot invest in improving products or cutting prices.

Europeans make more than 23 billion card payments every year worth more than euro1.35 trillion (US$2 trillion).