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Visa cleared in landmark EC anti-trust ruling

10 August 2001  |  4513 views  |  0 Visa

In a landmark anti-trust verdict for the international payment cards industry, the European Commission has given the all-clear to key provisions of the Visa card scheme, in particular the so-called 'no discrimination' rule and modified rules on cross-border services and interchange fees.

In its first anti-trust ruling in the cards arena, the EC says it has taken a favourable view of Visa's no discrimination ruling, which prevents retailers from charging fees for credit card use.

European competition commissioner Mario Monti says: "Although the Commission considers that the no-discrimination rule restricts the freedom of merchants to pass on a component of their costs to cardholders and may be restrictive of competition, empirical evidence has shown that the abolition of the rule at stake would not have appreciably increased competition."

The Commission has also approved amended provisions to the Visa scheme which allow banks to issue cards to customers living abroad or sign-up retailers in other member states. Following the latest amendments, Visa International allows cross-border issuing and acquiring without the prior establishment of a branch or subsidiary in the country concerned.

Moreover, the decision clears the "Honour All Cards Rule", which obliges merchants to accept all valid Visa-branded cards, irrespective of the identity of the issuer, the nature of the transaction and the type of card being issued.

The Commission additionally says it is ready to green-light Visa's controversial interbank interchange fees, albeit at a reduced level. The interchange fee - which is paid by the bank of the merchant to the bank of the cardholder for each card transaction - had earlier been identified by the Commission as a collective price agreement and therefore restrictive of competition.

Visa has since proposed changes which involve a reduction of the level of the fees, the introduction of objective criteria to set the level of the fees, and transparency on the level and the relative percentage of the cost categories vis-à-vis merchants.

"We are pleased that the need for interchange has been accepted," Hans van der Velde, president of Visa EU, says in a statement. "We accept the changes requested by the Commission, which include a reduction over time in the average overall rate of the Visa intra-regional interchange fee for consumer cards."

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