Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Commission signs off on Visa Europe’s commitments to end interbank fee probe, (Feb 26, 2014)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC)has made binding proposed commitments offered by Visa Europe to significantly lower its multilateral interchange fees (MIFs) for credit card payments to a level of 0.3% of the value of the transaction (a reduction of 60 percent) and to reform its rules in order to resolve EC competition concerns.

The EC announced today that it is continuing proceedings against Visa Inc. in relation to international interbank fees, which apply when a card holder from outside the Visa Europe territory uses a Visa credit card to make a purchase at a merchant in Europe. These fees are set by Visa Inc. and not by Visa Europe.

Inter-bank fees are paid by retailers’ banks (acquiring banks) to cardholders’ banks (issuing banks). The fees are fixed jointly by the banks retailers and consumers have no means of influencing them through competition. The reduction of these fees leads to lower costs for merchants when they receive payments by card. Since retailers normally pass on these charges to their customers through the higher prices for the goods and services they sell, consumers ultimately pay the fees that banks charge retailers. Therefore, a reduction of these fees is likely to benefit not only merchants, but also consumers.

Visa’s credit and debit cards represent approximately 41 percent of all payment cards issued in the European Economic Area (EEA). Visa has the largest acceptance network within the EEA with over 5 million merchants accepting its payment cards. In 2010 a total of 35 billion card payments were made in the EEA, with a total value of €1800 billion.

The EC sent Visa in April 2009 a Statement of Objections concerning MIFs for consumer debit and credit card transactions. Visa Europe offered commitments to cap its debit card MIFs at 0.20%, which the Commission made binding in December 2010. The proceedings regarding consumer credit MIFs continued and it is in the framework of those proceedings that Visa Europe offered the present commitments.

In July 2012 the EC sent Visa a supplementary statement of objections informing them that the inter-bank fees set by Visa and related practices may violate European Union (EU) antitrust rules. The concerns related in particular to: (1) rules on ‘cross-border acquiring’ in the Visa system that limit the possibility for a merchant to benefit from better conditions offered by banks established elsewhere in the internal market and (2) all inter-bank fees set by Visa for transactions with consumer credit cards in the EEA.

In its commitments, which complement its commitments on debit transactions made legally binding by the Commission in December 2010, Visa Europe undertakes: (1) to allow acquirers from January 1, 2015 to apply a reduced cross-border inter-bank fee (0.3% for credit and 0.2% for debit transactions) for cross-border clients; (2) Visa Europe agrees to cap its credit card MIFs at 0.3% for all consumer credit card transactions in the EEA where Visa Europe sets the rate; and (3) to simplify its inter-bank fee structure and make the invoicing of card acceptance services more transparent to merchants.

“The cap on inter-bank fees for Visa Europe’s credit cards and the commitments ensuring cross-border competition are excellent news for European consumers, since the fees paid by retailers end up on their bills,” said Joaquin Almunia, EC Vice President for Competition Policy, announcing the action. “Today’s decision adds to what has already been achieved through the Commission’s antitrust investigations concerning inter-bank fees.”

In complement to enforcement of EU antitrust rules, the Commission has proposed legislation to cap inter-bank fees for consumer debit and cards in the EU.

Companies: Visa Europe; Visa, Inc.

News: Antitrust