Visa under Kroes focus

The European Commission on March 26 launched “formal antitrust proceedings against Visa Europe Limited in relation to its multilateral interchange fees (MIF) for cross-border point of sale transactions within the EEA using Visa branded consumer payment cards.” The commission statement said, “This initiation of proceedings does not imply that the commission has proof of an infringement. It only signifies that the commission will conduct an indepth investigation of the case as a matter of priority.” The commission had cleared Visa’s “Honour-All- Cards-Rule” in 2001 followed by exemption for its MIF proposed after Visa International offered substantial reforms “to progressively reduce the level of its MIF from an average of 1.1 percent to 0.7 until the end of 2007 and to cap the MIF at the level of costs for specific services.”
“Visa also enhanced the transparency of fees and allowed banks to reveal information about the MIF to businesses,” the Commission statement admitted.
“The exemption, however expired on December 31, 2007 and Visa Europe Limited, which has taken over responsibility from Visa International for the network rules applicable in the EEA (European Economic Area the European Union plus Iceland, Liechtenstein and Norway), has from that moment been responsible for ensuring that its system is in full compliance with EU competition rules,” according to the Commission. The MIF is a charge on each payment at a merchant outlet, retained by the customer’s bank (the issuing bank) and charged to the merchant’s bank (the acquiring bank) which then takes this cost element on board in settling its prices to merchants. Although the Commission stressed that there was no evidence against Visa Europe, the Commission last year ruled against similar types of fees levied by the company’s rival, MasterCard.
Answering journalists’ questions at regular midday commission press conference, Jonathan Todd, the spokesman for Neelie Kroes, European Commissioner for Competition Policy, clarified, “(It is) own initiative (of the commission) as it wants to examine the way Visa system operates in the light of” expiry of the exemption. Replying to another question about how long it will take to decide, Todd said, “We’re a very, very long way from deciding whether there is a problem. With any kind of antitrust violation, the Commission can impose a fine. It can also impose remedies, or both. But for the moment it would be premature to speculate.”
Visa reacted quickly, saying in a statement that the announcement was “expected by Visa Europe and is a standard procedural step.” “We see no evidence that Visa Europe’s interchange has acted as a tax on consumption or has caused consumers to pay twice. The net result of a substantial reduction in interchange would see a disproportionate shift in the costs of the card payments system from retailers to consumers,” the company statement said. “Interchange fees set at a fair level ensure the effective operation of card payment systems and enable the replacement of inefficient payments like cash and cheques,” Visa’s statement said. EuroCommerce, which had complained against Visa way back in 1997, welcomed the Commission announcement saying, “This step shows that the Commission is determined to continue to take a stand against these fees which are a hidden tax on retailers and consumers alike.”
Xavier R Durieu, Secretary General of EuroCommerce said in a statement, “We are very pleased that the Commission has acted so quickly in beginning this action.” He continued, “The Single Euro Payments Area project has the full backing of the retail sector. However, only with the abolition of the MIF will SEPA be able to achieve its goals of a quicker, more reliable and less expensive payments system for business and consumers.”