Investigation into Possible Collusion among Credit Card Companies

The Korea Fair Trade Commission (KFTC) has started investigation into possible collusion among credit card companies regarding their demands to raise interchange fees.

The KFTC said on Thursday that it would probe BC Card, KB Card, and LG Card for their possible collusion. The KFTC suspects these companies because the timing and the increase rate are very similar. It will expand the probe to other card companies if the charges are proven true.

No big disruptions were seen on Thursday, two days after E-mart, Korea’s largest discount chain, refused to take BC cards. However, consumers are likely to experience more inconvenience since they will not be able to use KB cards at E-mart outlets starting September 6. BC Card and E-mart have opened a channel for negotiation, minding consumer complaints, but chances are very slim that they will actually reach an agreement.

E-mart said that 260 BC Card users, or 0.08 percent of the total customers, gave up purchasing goods at its outlets on September 1. BC Card accounted for 19 percent of the total transaction made at E-mart last year.

The usage of other credit cards also shrank. Credit card payments at E-mart outlets on September 1 were 56 percent, nine percent lower than the average 65 percent.

“Let’s have CEO discussions, or an open forum organized by the media, to ease consumer inconvenience,” proposed Gu Hag-seo, president of Shinsegae Co. at the meeting with reporters on Thursday.

“E-mart customers are also the customers for credit companies,” said the president. “Let’s postpone the raise until the end of Chuseok holiday, which is a big shopping season, in order not to incur more inconvenience.”

The president, however, made it clear that he would not negotiate for the raise of interchange fees, and he is only available for finding ways to reduce the burden of credit card companies through reducing management costs related to card transactions.

With regard to the CEO discussions, BC Card expressed its opposition saying that negotiations should first start at the working level. It also said that it would not budge from their rate increase.

BC Card, however, said that it could cooperate with E-mart in reducing the management cost of transactions.