Bloomberg News

Canada Tribunal Dismisses Visa and MasterCard Store-Fee Case (3)

July 23, 2013

Canada’s Competition Tribunal dismissed a case against MasterCard Inc. (MA:US) and Visa Inc. (V:US) that would have allowed merchants to reject some high-fee credit cards or impose surcharges on customers who use them.

The tribunal said the case brought by Canada’s competition watchdog was dismissed without costs in a ruling from Ottawa today. Some of the reasons for the decision are confidential, the tribunal said.

The ruling covers credit-card payments worth C$240 billion ($233 billion) and annual fees of C$5 billion, 90 percent of which involve MasterCard and Visa cards distributed by Canadian banks, according to tribunal documents. The Commissioner of Competition sought an order that would have allowed merchants to refuse, discourage or impose surcharges on the use of premium cards that impose higher fees on sellers.

“The proper solution to the concerns raised by the Commissioner is a regulatory framework,” the tribunal’s panel of three members said in one-page summary of the decision. Arguments made had little basis in “legislative history,” the tribunal said in the summary.

The Competition Bureau is reviewing the Tribunal’s decision to determine how to proceed, John Pecman, competition commissioner, said in a press release today. He said Canadian retailers pay among the highest card fees in the world.

‘Adverse Effect’

“The decision recognized that this case is one that should have been brought before the Tribunal and found that Visa and MasterCard’s conduct had an adverse effect on competition,” Pecman said in the statement.

Finance Minister Jim Flaherty said he’ll be monitoring any potential appeal and will call a special meeting of a government committee on payments issues.

“As job creators and drivers of economic growth, Canada’s small business owners and entrepreneurs - along with consumers - deserve clear information and fair and transparent rules on the type of payment system they use,” Flaherty said in a statement today.

The Canadian Federation of Independent Business said it was disappointed by the decision.

“This isn’t the outcome we were hoping to see, but entrepreneurs can rest assured that CFIB isn’t going away,” Dan Kelly, president of the group, said in a release. “We’re going to keep fighting against unfair practices by the credit card giants.”

First Date

“Many merchants understand the value that’s delivered because of this credit card acceptance,” and customers benefit as well, Betty K. DeVita, president of MasterCard Canada, said in a telephone interview. “Imagine you’re on a first date, you’re ready to pull out a card and they aren’t accepting that card.”

Fees for using credit cards may continue to rise for retailers, said Garth Whyte, president of the Canadian Restaurant and Foodservices Association.

“Somebody has to corral this Wild West credit-card world,” he said in a telephone interview. “The credit card companies are making more than our members on a one hundred dollar bill.” The group has more than 30,000 members and the industry employs 1.1 million people, he said.

Card revenue represents 3.8 percent of total revenue for the six largest Canadian banks, according to Andre-Philippe Hardy, an analyst at RBC Capital Markets in Toronto. Toronto-Dominion Bank, the second-largest lender in the country, made C$1 billion in card service revenue in 2012, or 4.5 percent of total revenue, according to Hardy.

U.S. Case

“While positive for banks, we do not expect a material impact on bank stocks as we do not believe the case was a major source of concern for investors,” he said in a note to clients following the decision being released.

The ruling follows Visa’s and MasterCard.’s $7.25 billion settlement of an antitrust suit in the U.S. over merchant credit card fees under which the companies agreed to lift their own restrictions against surcharges.

The settlement in that case, said to be the largest-ever in a U.S. antitrust case, is opposed by dozens of large retailers, which say it isn’t big enough and allows the card companies to continue to fix fees.

The case is CT-2010-010, The Commissioner of Competition v. Visa Canada Corporation and MasterCard International Incorporated.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Chris Wellisz at cwellisz@bloomberg.net


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Companies Mentioned

  • MA
    (MasterCard Inc)
    • $75.91 USD
    • 0.02
    • 0.03%
  • V
    (Visa Inc)
    • $214.06 USD
    • 0.56
    • 0.26%
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