Dec 18 (Reuters) - New Zealand's Commerce Commission on

Wednesday issued a draft decision to reduce the fees that local

businesses pay to accept Visa and Mastercard ( MA ) payments.

The proposal would lead to an annual reduction of around

NZ$260 million ($149.50 million) in the largest component of the

fees charged to New Zealand businesses for receiving Visa and

Mastercard ( MA ) payments, according to the Commission's statement.

"We're also setting the clear expectation that payment

providers and businesses should pass these savings on to

customers," said Commission Chair John Small.

A 'merchant service fee' is assessed to the company that

receives the payment whenever a customer uses a Mastercard ( MA ) or

Visa credit card, or makes a contactless payment.

The companies try to recoup this cost by raising retail

prices or imposing surcharges, the Commission said in the

statement.

New Zealand businesses have shouldered about NZ$1 billion in

annual fees to offer Visa and Mastercard ( MA ) payment options, with

consumers spending nearly NZ$95 billion using these services,

the Commission said.

It further added that this decision is part of the

Commission's ongoing efforts to simplify and reduce payment

costs for businesses and consumers alike.

($1 = 1.7391 New Zealand dollars)