Midland in on-line shopping row

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BRITISH Interactive Broadcasting, the on-line shopping service due to be launched as part of BSkyB's digital television system, is ensnarled in a row pitting Midland Bank against retailing giants Tesco, GUS and the Burton Group, writes Peter Koenig.

The dispute centres on the vexed issue of how groceries, clothes, and other items purchased via television sets are paid for. Midland, which along with BSkyB, BT, and Matushita, jointly owns BIB, believes credit card payments made for on-line purchases must be cleared through it.

But executives negotiating for the retailers argue they should be allowed to use their own banks to clear on-line purchases. "Banks earn 1-4 per cent for clearing credit card purchases," said one. "We want to deal with our regular banks. BIB was telling us the technology required us to use Midland. But now they have backed down on this point."

The row comes at an awkward time for BIB. Last week, Peter Mandelson, the Secretary of State for Trade and Industry, announced his intention to change the law to make on-screen shopping through the Internet easier. This reduced BIB's leverage over retailers who may now opt to sell through home computers rather than televisions.

Both Midland and BIB downplayed the dispute, characterising the retailers' objections a standard negotiating ploy. "We put pounds 60m on the table," a Midland source said. "That gives us certain rights."

Clearing fees over the first two years of the service could come to pounds 3- 4m. "It's not the money," said a retailer. "It's the principle. Who owns the on-screen shopper?"

BIB will not identify the retailers whom it is hoping to sign up to its on-screen shopping service. Nor will it give a date for the service launch. But a retailer suggested that the first phase of the launch could be announced by the end of the month.