Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Visa's Currency Conversion Rules Subject of Australia Competition and Consumer Commission Action, (Feb 5, 2013)

By Jeffrey May, J.D.

Visa, the operator of the world's largest retail electronic payments processing network, abused its market power in violation of Australia's competition laws through its rules on dynamic currency conversion services (DCC), the Australian Competition and Consumer Commission announced on February 4. The ACCC is seeking penalties, declarations, and costs against Visa.

DCC gives travelers to Australia the choice of completing a transaction in their home currency or in the local currency of the retail store or ATM. If a cardholder chooses DCC, the exchange rate is locked in and disclosed to the cardholder at the time of making a transaction. This provides cardholders with certainty about the exchange rate applied and reduces the risk to cardholders from subsequent changes in exchange rates, the ACCC explained. The ACCC alleged that Visa earned less revenue when a cardholder selected DCC than when a cardholder used Visa’s own currency conversion service.

Since October 2007, Visa has allegedly banned the use of DCC on transactions at ATMs using Visa cards in Australia. As a result, Australian suppliers of DCC services were, and continue to be, denied the opportunity to compete with Visa in relation to DCC services at ATMs, according to the ACCC.

In addition, during 2010, Visa allegedly implemented and maintained rules that prohibited the expansion of the supply of DCC services on point of sale (POS) transactions on the Visa network by its rival suppliers of currency conversion services in many parts of the world, including in Australia. The ban meant that merchants that were not already offering DCC to their customers as of April 30, 2010, could not choose to offer DCC. In effect, this froze the pool of merchants who could offer DCC during the period in which the ban was in force.

The ACCC also alleged that Visa engaged in exclusive dealing, by supplying access to its payment network to Australian banks and in turn, retailers, on condition that they did not acquire DCC services from DCC suppliers.

Visa is no stranger to antitrust challenges from regulators. In 2010, Visa, along with Master Card, agreed to settle a civil antitrust suit brought by the U.S. Department of Justice and several states, alleging that the credit card companies restricted price competition at the point of sale by barring merchants from offering consumer discounts, rewards, and information about card costs. American Express, which was also named in the suit, has said that it will defend its practices in court.

Also in 2010, to resolve European Commission concerns over competition in the payment cards markets, Visa agreed to cut its multilateral interchange fees (MIFs) for debit card payments. The MIF is a bank-to-bank fee for card payments that is collectively fixed by Visa Europe's member banks, but is ultimately paid by consumers.

More recently, Visa is working to settle a national class action on behalf of retailers over credit card swipe fees. The settlement would resolve an antitrust action against Visa, MasterCard, and major U.S. financial institutions alleging that credit card issuers conspired to fix swipe fees, or charges that retailers pay to accept credit cards.

Visa Response. Visa issued a statement in response to the ACCC action, saying that it would “vigorously defend itself against claims by the Australian Competition and Consumer Commission that our rules on Dynamic Currency Conversion (DCC) infringe Australia’s competition laws.”

“Visa has cooperated fully with the investigation by the ACCC and we strongly reject allegations that our rules on DCC services infringe Australia’s competition laws,” said Zoe Hibbert, a spokesperson for Visa.

News: Antitrust