Visa told to reduce transaction fees

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The European Commission sent a formal statement to Visa on Friday (3 April), announcing its intention to bring an antitrust case against the credit card firm for over-charging its fees.

The ‘statement of objections’ sent to Visa is a formal step in Commission antitrust investigations, whereby the EU executive informs the parties concerned of the objections raised against them. 

According to a Commission statement, charges on card payments made across Europe – so-called multilateral interchange fees (MIFs) – set by Visa “restrict competition between banks for accepting consumer payment cards”. 

The statement argues that a MIF “in an open payment card scheme” such as Visa’s is only compatible with European antitrust rules if it contributes to “technical and economic progress and benefits consumers”. But the Commission alleges that Visa has failed to contribute to such progress. 

Visa Europe Chief Executive Peter Ayliffe said he was “extremely disappointed that having converged to a point where we were close to agreement on debit, the Commission has decided to issue a Statement of Objections”. 

He added that the Commission’s move was particularly regrettable since Visa had agreed to follow the EU executive’s “preferred economic model for justifying interchange rates”.

EuroCommerce, which represents the retail, wholesale and international trade sectors in Europe, warmly welcomed the EU executive’s move. “The Commission’s action is a further sign that the interchange fee has had its day,” said EuroCommerce Secretary-General Xavier Durieu. 

“We urge the Commission to stand firm by the principles established in the MasterCard decision of December 2007, and to close the door on what [EU Competition] Commissioner [Neelie] Kroes herself called a tax on consumers,” he argued.

MasterCard move 

The move follows last week’s move by MasterCard to reduce its MIFs following sustained pressure from the Commission to do so. 

Upon hearing of MasterCard’s announcement, Commissioner Kroes voiced expectations that Visa would shortly follow suit. “I will not allow Visa to benefit at the expense of MasterCard,” Kroes said, adding that the fees and the methodology adopted by MasterCard could be used as a kind of benchmark for others in the sector. 

Visa Europe had reacted cautiously to MasterCard’s move, saying each case should be judged on its own merits (EURACTIV 2/04/09). 

Under the recently announced changes, MasterCard will bring cross-border MIFs on credit card transactions down to 0.3% from the current range of 0.8% to 1.9%. 

On the Maestro network of debit card transactions, MasterCard has agreed to cut charges to 0.20% from the current range of 0.4% to above 0.75%. 

Both sets of measures will enter into force as of July 2009. 

Currently, Visa applies a 0.61% rate for cross-border EU credit transactions, and an average €18 cents for debit payments. 

A multilateral interchange fee (MIF) is an interbank payment made for each transaction carried out with a consumer card. Retailers are charged for the fee, which ultimately affects the price of goods, whether they are purchased with a card or not. The issue thus concerns all consumers. 

Visa's credit and debit cards represent approximately 36% of all payment cards issued in the European Economic Area (EEA). Visa has the largest acceptance network in the EEA, and over five million merchants accept its payment cards. In 2006, a total of 27 billion card payments were made in the EEA, with a total value of €1,600 billion. 

The European Commission only has the power to intervene in cross-border transactions, which occur when a French tourist uses his card in a shop in Amsterdam, for example. These represent 5% of total MIFs, according to the EU executive. 

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