Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Visa Offers Commitments to Resolve EC Concerns About Interbank Fees, (May 15, 2013)

By Tobias J. Gillett, J.D., LL.M.

Visa Europe Limited has proposed commitments to the European Commission (EC) that would lower its interbank fees for credit card payments and revise its rules to allow banks to apply a reduced cross-border interbank fee to facilitate cross-border competition. The EC announced on May 14 that it will market test the commitments, which Visa offered in response to the EC’s supplementary statement of objections asserting that Visa’s practices may violate European Union antitrust rules.

Multilateral interchange fees (MIFs) are fees paid by merchants’ banks (acquirers) to cardholders’ banks (issuers) for transactions with consumer credit cards. The EC expressed concern in its supplementary statement that Visa’s MIFs reduce price competition between acquirer banks, inflate the cost of payment card acceptance for merchants, and raise prices for consumers. Moreover, the EC observed that Visa had not shown that its MIFs contribute to technical or economic progress, which could justify granting them an exemption under Article 101(3) of the Treaty on the Functioning of the European Union.

Further, the EC objected to Visa rules requiring acquirers to apply the MIFs applicable in the country where the transaction took place rather than the MIFs applicable in the acquirers’ home countries. The EC believed these rules could limit cross-border competition and segment the European market, preserving a wide divergence of fees across the European Economic Area (EEA).

In its proposed commitments, which would apply for four years, Visa would cap its credit card MIFs at 0.3% of the value of a transaction, reducing the MIFs by around 40-60%, according to the EC. In addition, Visa would revise its rules to allow banks to apply a reduced cross-border inter-bank fee when competing for clients across borders. The EC will conduct a market test of the commitments to obtain feedback from interested parties, and may then make the commitments legally binding on Visa.

"It is excellent news that Visa decided to submit these commitment proposals in response to our objections," said Joaquín Almunia, Commission Vice President in charge of competition policy. "Given the importance of card payments for European consumers and businesses across the Single Market, putting an end to restrictions of competition in inter-bank arrangements is a key priority for the Commission. The decision by Visa is a major step forward in that direction."

According to the EC, European businesses and consumers make more than 40% of their non-cash payments through payment cards, with Visa’s credit and debit cards representing approximately 41% of all payment cards issued in the EEA. The present commitments follow commitments made legally binding on Visa in December 2010, under which Visa capped its debit card MIFs at 0.2%. The EC opened proceedings against Visa in March 2008.

The EC has also been investigating MasterCard’s use of cross-border interbank fees. In 2007, the EC prohibited MasterCard’s cross-border interbank fees within the EEA, and the General Court rejected MasterCard’s appeal. MasterCard has appealed that ruling. MasterCard offered unilateral undertakings in 2009, under which MasterCard would cap its debit card MIFs at 0.2% and its credit card MIFs at 0.3%, but those undertakings have expired. The EC has also opened proceedings against MasterCard over its inter-regional interbank fees.

Companies: Visa Europe Limited

News: Antitrust