Commission investigates Visa’s cross-border card fees

The European Commission has opened a formal inquiry into the fees imposed by Visa on card payments made across EU borders, saying it will seek to determine whether prices have been fixed at an unduly high level.

The Commission’s antitrust department yesterday (26 March) announced the beginning of proceedings against Visa Europe over its multilateral interchange fees (MIF). 

The inquiry will focus exclusively on the cross-border application of these charges, which fall directly under EU rules, but the move at European level might prompt similar actions by national competition authorities.

The inquiry follows a fine which Brussels recently inflicted on Visa’s competitor, MasterCard, over the same charges. There is no deadline for the closure of the inquiry.

The investigation will determine whether Visa’s MIF is set at an abnormally high level, something the Commission believes would unfairly penalise consumers because shop owners pass on the costs to both card and cash payments. 

The Commission has stated on several occasions that it is not against MIFs in principle, provided that they bring clear benefits to consumers or provide technical or economic progress.

The Commission will also look into the legality of the so-called ‘Honour-All-Cards-Rule’ applied in connection with cross-border transactions. In 2001, Brussels cleared a rule in the Visa scheme which obliges merchants to universally accept all valid Visa-branded cards. But now that the Commission has to verify potential price fixing regarding Visa’s MIFs, it must also open an investigation there, otherwise merchants could be forced to apply illegally fixed prices.

In a statement, Brussels underlined that “the initiation of the proceedings does not imply that the Commission has proof of an infringement”. 

The announcement came in the wake of Visa’s strong market debut on the New York Stock Exchange on 19 March, following a record 17.9 billion dollar initial public offering (IPO), the highest ever recorded in the US.

Jonathan Toddspokesperson for EU Competition Commissioner Neelie Kroes, said: "This is an important issue for consumers because if the MIFs are set too high then consumers can end up paying higher prices in the shops, and not only those using cards but also those paying cash because the prices are equal for all."

Paul Ravenscroft, spokesperson for Visa Europe, commented: "Today's announcement by the Commission was expected by Visa Europe and is a standard procedural step. We will continue our dialogue with the Commission about our interchange fees."

"We see no evidence that Visa Europe's interchange has acted as a tax on consumption or has caused consumers to pay twice. The net result of a substantial reduction in interchange would see a disproportionate shift in the costs of the card payments system from retailers to consumers," he added.

Xavier R. Durieu, the secretary general of EuroCommerce, an association of EU retailers, hailed the launch of the Commission investigation. "Following the MasterCard decision, this step shows that the Commission is determined to continue to take a stand against these fees which are a hidden tax on retailers and consumers alike," Durieu said. "We are very pleased that the Commission has acted so quickly in beginning this action."

British Retail Consortium (BRC) Director General Stephen Robertson echoed this stance: "With toughening economic conditions, the need for an end to these excessive, inexplicably calculated, costs is greater than ever." "The card companies must understand the days of unjustifiably creaming-off customers' cash are over. Visa must co-operate with the Commission to reach a resolution quickly," he said.

Announcing legal action against the Commission in March, Javier Perez, president of MasterCard Europecommented: "MasterCard firmly believes that market forces, not regulation, should drive key decisions such as the setting of interchange fees and retailers' choices over which forms of payment to accept. If left unchallenged, and especially if followed by national regulators, the Commission's decision would not only be bad news for consumers but a blow to the European payments industry."

A multilateral interchange fee is an interbank payment made for each transaction carried out with a payment card. In the EU, over 23 billion payments are made every year with payment cards, the overall value of which exceeds 1,350 billion euros.

The Commission ruled on 19 December 2007 that MasterCard's multilateral interchange fees (MIF) for cross-border payment card transactions violate EU rules on restrictive business practices. At the beginning of March, MasterCard appealed against this decision (see EURACTIV 04/03/08).

Visa's MIFs were temporarily allowed in 2002 by the Commission up to 31 December 2007. Visa's fees are on average lower than MasterCard's.

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