Shares in British companies that charge customers high fees to pay by debit and credit card fell after the government said that such charges would be made illegal from next year.
The government said it was clamping down on “rip-off card charges” which were “unfair for millions of people across the country”, with UK consumers estimated to have spent more than £470m on fees in 2010. The government said the fees can be as high as 20 per cent of a total bill, but would be banned from January.
Shares in Just Eat, the takeaway app, dropped more than 6 per cent initially — its worst day since January — but recovered to trade about 1 per cent lower by the end of the day.
Just Eat charges 50p per credit card transaction, as does rival Hungryhouse, which is subject to a takeover approach by Just Eat. About 13 per cent of Just Eat’s revenues came from card fees last year, with two-thirds of its orders paid for by card.
UK-listed airlines also fell on the news before recovering later in the day, with the government specifically mentioning the sector when introducing the ban. BA and EasyJet charge 1 per cent extra for credit card transactions, while Ryanair and Norwegian airlines charge 2 per cent.
Stephen Barclay, economic secretary to the Treasury, said that the move was “about fairness and transparency”.
“Rip-off charges have no place in a modern Britain and that’s why card charging in Britain is about to come to an end,” he said
The rules also tackle surcharging by local councils and government agencies, such as the Driver and Vehicle Licensing Agency. The DVLA charges a flat fee of £2.50 for card payments — a policy it will be forced to amend. Other retailers are also affected.
But some experts said banning surcharges will simply lead businesses to push up their prices. Larger businesses such as global airlines may absorb the costs to remain competitive, but smaller companies could come under greater pressure.
Analysts said that the exposure for airlines was more limited given any charges would be at a much lower percentage of earnings than takeaway apps.
Analysts at Barclays said the rules were simply the implementation of an EU directive, and that the share price move for companies like Just Eat was unwarranted.
Barclays said that Just Eat’s business model was not directly affected by this legislation, and added that the affected companies would likely “raise prices to cover this” or will add “generic administration fees” to transactions.