Antitrust: Vice President Almunia welcomes Visa Europe’s proposal to cut interbank fees for debit cards

European Competition Commissioner Joaquín Almunia welcomes proposed commitments by Visa Europe to significantly cut its multilateral interchange fees (MIFs) for debit card payments. The MIF is a bank-to-bank fee collectively fixed by Visa Europe’s member banks for card payments that is ultimately paid by consumers. In 2009, the Commission communicated its preliminary view to Visa that its MIFs restricted competition between the banks of the merchants. Visa Europe has proposed to reduce to 0.20% the maximum weighted average MIF for all cross border transactions and for national transactions in a number of Member States with debit cards. It also proposes to maintain and further develop measures which will increase transparency and competition in the payment cards market.

„I welcome Visa Europe’s willingness to reduce multilateral interchange fees and to make its rules more transparent. This will improve the efficiency of the European financial system to the benefit of consumers and retailers.” Competition Commissioner Joaquín Almunia said.

Today, Visa Europe has proposed to reduce to 0.20% (of the final price of a product or service) the fee that is collectively determined and charged between banks for each payment by debit card. The fee is integrated in the price banks charge to merchants for processing the transaction and therefore entails a cost that merchants will in turn integrate in the price or products they sell to consumers. The Commission had informed Visa it viewed the Multilateral Interchange Fee as disproportionate and a potential infringement of antitrust rules (Article 101 of the TFEU) that did not present the necessary benefits to warrant an exemption to the rules (Art 101 (3)).

The proposed reduction to 20 basis points is in line with the unilateral undertakings given by MasterCard in April 2009 (see IP/09/515). The reduction reflects the application of the „merchant-indifference methodology”, which seeks to establish the MIF at a level at which merchants will be indifferent as to whether or not a payment is made by a Visa Europe debit card or by cash. The amount was calculated by comparing the merchants’ costs of accepting payments in cash to those of accepting payments made by a payment card. These calculations are without prejudice to a further calculation should new information regarding the costs of cards vis-à-vis the costs of cash become available. Further data relevant to the costs of different means of payment may become available following completion of the study expected to be launched by the Commission in 2010. Like other stakeholders, Visa Europe would be consulted on the methodology to be applied in the study and its scope.

After the usual internal procedures at the Commission, Visa Europe’s proposal will be market tested, with a view to adopting a decision under Article 9 of Regulation 1/2003. Under such a procedure, the commitments would be made legally binding and the Commission would not pursue the antitrust investigation further as far as MIFs for debit cards transactions are concerned.

The commitment decision will not cover current MIFs for consumer credit and deferred debit card transactions which will be included in the ongoing antitrust investigation by the Commission covering past MIFs for consumer credit and deferred debit card transactions. The proposed commitments are also without prejudice to the right of the Commission to initiate or maintain proceedings against Visa Europe’s network rules such as the „Honour All Cards Rule”, MIFs for commercial card transactions, and Inter-Regional MIFs.

Visa Europe and the Commission will continue discussions in relation to an appropriate application of the merchant indifference methodology to credit and deferred debit transactions.

The countries that would benefit from the domestic MIF reduction are those European Economic Area countries where the MIFs are currently set by Visa Europe, namely Greece, Hungary, Iceland, Ireland, Italy, Malta, Sweden, Luxembourg, and the Netherlands. In the last two countries, only Visa prepaid cards are currently issued. In the remaining EEA countries, the domestic MIFs are agreed by Visa Europe’s local member banks. The domestic MIFs in the countries subject to the commitments will be reduced by about 60% on average, while the cross-border MIFs will be reduced by about 30%.

For background on the Visa investigation see MEMO/09/151