MasterCard UK is levying a stealth tax on British retailers and shoppers, according to provisional findings from the Office of Fair Trading.
The OFT found the common transaction fee being charged by members of MasterCard UK's credit card association infringes the Competition Act.
According to the OFT, retailers pay 'an unjustifiably high fee' on every purchase made using MasterCard credit or charge cards. That cost is ultimately borne by customers.
The report recommends the need for greater transparency in the setting of transaction fees.
The investigation stems from a complaint lodged by the British Retail Consortium in September 2000, with the BRC claiming a victory for consumers and retailers alike.
BRC deputy director-general Mark Bradshaw said: 'The OFT got it right by identifying the MIF (MasterCard Interchange Fee) as a tax on retail transactions that is paid for by all consumers in shops that accept credit cards. The OFT must be firm in pressing for a more flexible and transparent credit card market.'
According to MasterCard, the charge 'covers the cost and risk to the card company in providing the retailer's customers with safe, interest-free credit' and urged the OFT 'not to destroy a system that so clearly works in the interests of the consumers they seek to protect'.
The OFT will make a final decision in the spring on what action is necessary.