Harrods calls for reform of store card contracts

Harrods has broken ranks with the rest of the retail sector by hitting out at the "limited competition" in the store card market.

The department store, owned by Mohamed al-Fayed, believes that long-term contracts with finance houses and the high cost of switching are major barriers to competition.

The Competition Commission is three months into a two-year investigation into retailers' store cards, the average interest rate on which is 25.2, 10 percentage points above the typical APR on a credit card.

The Commission is investigating whether the high rates are due to the limited competition. GE Capital controls over 50 per cent of the market and supplies to retailers such as Arcadia, Debenhams and Comet.

GE also operates the Harrods store card, which has an APR of 28.9 per cent. Harrods entered into a 15-year contract with GE in 1991. But in a report sent to the Commission, Harrods says that the length of the contract is "likely to operate as a further barrier to competition".

Harrods' view is in stark contrast to those of most other retailers offering store cards through GE. Arcadia, the company controlled by Philip Green, which includes Top Shop and Burton stores, is GE's longest-standing customer.

In its report to the Commission, Arcadia says that there is sufficient competition and retailers can switch suppliers without incurring large costs.