Antitrust: Vice President Almunia welcomes Visa Europe's proposal to cut inter-bank fees for credit cards
Vice President Almunia welcomes Visa Europe's proposed commitments to significantly cut its inter-bank fees for credit card payments, to a level of 0.3% of the value of the transaction (a reduction of about 40 to 60%) and to reform its rules in order to facilitate cross-border competition. The proposals by Visa follow the sending of a supplementary statement of objections by the Commission in July 2012 (see IP/12/871). The Commission will seek feedback on these proposals from interested parties through a market test. The Commission may then decide to make them legally binding on Visa Europe.
Commission Vice President Joaquín Almunia, in charge of competition policy, said: "It is excellent news that Visa decided to submit these commitment proposals in response to our objections. 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". (Video statement by VP Almunia: http://c14005-o.l.core.cdn.streamfarm.net/findmedia/01/078241/MP2_I078241EN1W.mpg)
Payments by card play a key role in the EU internal market, in particular for purchases across borders or over the internet. European consumers and businesses are making more than 40% of their non-cash payments per year through payment cards. Any competition distortions in this field may therefore hamper the good functioning of the Single Market and harm European consumers through higher prices.
The Commission's concerns:
In July 2012, the Commission formally informed Visa by sending a supplementary statement of objections that the inter-bank fees set by Visa for consumer credit cards and related practices may violate EU antitrust rules (Article 101 of the Treaty on the Functioning of the European Union – TFEU) (see IP/12/871). The concerns related in particular to:
(i) 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. These rules today oblige banks to apply the inter-bank fees of the country where the merchant is located even if the fees in their home country are lower. As a result cross-border competition remains limited and the segmentation of the internal market and the wide divergence of fees across the European Economic Area (EEA) are preserved.
(ii) All inter-bank fees set and implemented by Visa for transactions with consumer credit cards in the EEA. These MIFs currently apply to international and cross-border transactions in the EEA, as well as to domestic transactions in ten EU Member States or EEA countries (currently in Belgium, Hungary, Iceland, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands and Sweden). These inter-bank fees are paid by merchants' banks (acquirers) to cardholders' banks (issuers) for transactions with Visa's consumer credit cards.
Visa Europe's proposals
Following the opening of proceedings against Visa in March 2008 and its commitments on debit cards in 2010 (limiting its debit card fees to 0.2%), Visa has now made a proposal regarding the concerns raised by the Commission in July 2012 as well. In concrete terms Visa Europe undertakes for four years:
(i) As regards 'cross-border acquiring': to reform its system in such a way that banks will be able to apply a reduced cross-border inter-bank fee when they compete for clients cross-border. This is expected to lead to considerably lower rates for merchants in the EEA, also benefiting final consumers.
(ii) As regards inter-bank fees: Visa Europe offers to cap its credit card MIFs at 0.3% of the value of the transaction for cross-border and domestic transactions, a reduction of about 40-60%. The level of 0.3% for credit card transactions was also offered by MasterCard in its Undertakings in 2009 (see IP/09/515).
Background on payment cards investigations
Visa's credit and debit cards represent approximately 41% of all payment cards issued in the 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.
Following the opening of proceedings in March 2008, the Commission sent Visa in April 2009 a Statement of Objections concerning multilateral interchange fees ("MIFs") for consumer debit and credit card transactions (see MEMO/09/151). Visa Europe offered commitments to cap its debit card MIFs at 0.20%, which the Commission made binding in December 2010 (see IP/10/1684). The proceedings regarding consumer credit MIFs continued. It is in the framework of these proceedings that Visa Europe offers the present commitments.
In parallel, the Commission has also been investigating MasterCard.
In 2007, the Commission prohibited MasterCard's cross-border inter-bank fees within the EEA (see IP/07/1959 and MEMO/07/590). In May 2012, the General Court rejected MasterCard's appeal against that decision (see MEMO/12/377 and case T-111/08). MasterCard has appealed the judgment.
In 2009, MasterCard had offered unilateral Undertakings to cap its debit and credit card MIFs at 0.20% and 0.30% respectively. These Undertakings formally expired on the day of the General Court's judgment (see IP/09/515).
The Commission has recently opened new proceedings against MasterCard to investigate inter-regional inter-bank fees and cross-border acquiring (see IP/13/314).
Article 101 of the Treaty on the Functioning of the EU (TFEU) and Article 53 of the EEA Agreement prohibit cartels and restrictive business practices. Article 101(3) TFEU allows certain practices to be exempted from this prohibition on condition that they improve production or distribution or contribute to technical or economic progress, provided that a fair share of the benefits are passed on to consumers, and that the practices are proportionate and do not eliminate competition.
Pursuant to Article 27 (4) of Regulation 1/2003, the Commission will soon publish a "market test notice" with a summary of the proposed commitments in the EU Official Journal, inviting interested parties to present their comments. If, following the results of the market test, the Commission reaches the conclusion that the proposed commitments are suitable to remedy its competition concerns, the Commission will adopt a decision pursuant to Article 9 of Regulation 1/2003, making the commitments legally binding on Visa Europe.