Mumbai: The European Commission, the executive arm of the European Union, has found that MasterCard's method of charging fees for international purchases violates EU antitrust rules, reports quoting sources familiar with the situation said.

While the "interchange fees" that MasterCard currently charges are not valid, the European Commission may accept another method of computing them, the report said. Competition commissioner Neelie Kroes said the current system rips off consumers.

The US card firm sets many fees on shops and other service providers for each MasterCard purchase, which average around one per cent of the purchase price.

The seller's bank then pays the "interchange" fee to the cardholder's bank.

Retailers complain that they are forced to spend billions of euros on the interchange fee that includes provision for non-payment, fraud, promotions and free credit.

The EC wants MasterCard to design a different interchange fee plan, the report added.

MasterCard, however, maintains it should decide the principle of setting own fees and that the EC has no power to cap them.

Twelve of the EU's 27 countries have been examining fee structures in domestic card schemes, and the EC decision will shape how they deal with those schemes' interchange fees.

International transactions account for 3 per cent of card usage but this is expected to grow as barriers to cross-border services grow and people become more mobile.