The Competition Tribunal has issued a decision dismissing the
Commissioner of Competition's application against Visa and
MasterCard. The Commissioner had challenged Visa and
MasterCard's rules under the price maintenance provisions of
the Competition Act (Canada). The Commissioner alleged that these
rules have effectively eliminated competition between Visa and
MasterCard for merchants' acceptance of their credit cards,
resulting in increased costs to businesses and, ultimately,
The Competition Bureau launched an investigation in response to
complaints by merchants regarding the rules that Visa and
MasterCard impose on merchants who accept their credit cards. In
April 2009, the Bureau initiated a formal inquiry, and in December
2010, the Commissioner filed an application with the Competition
Tribunal challenging the rules as anti-competitive. The application
was brought under the price maintenance provisions of the
Competition Act, which prohibit certain practices that upwardly
influence or discourage reductions of the prices of goods or
services and have an adverse effect on competition. The
Commissioner alleged that the rules contain numerous
anti-competitive restraints including:
the no discrimination rule prevents merchants from treating a
customer who presents a certain credit card less favourably than a
customer who presents a different credit card;
the honour-all-cards rule requires merchants to accept all
credit cards from a specific network, including premium reward
cards with higher card acceptance fees; and
the no-surcharge rule prevents merchants from charging a fee on
transactions made with Visa or MasterCard credit cards.
The Competition Tribunal dismissed the application filed by the
Commissioner. The Tribunal found that section 76 of the Competition
Act (price maintenance) requires a resale, and that the
Commissioner had not established that the customers of Visa and
MasterCard resell the products of these enterprises. The Tribunal
further held that the Commissioner's proposed interpretation of
section 76 was not supported by the legislative history of the
provision or other decisions.
Of note, in the event that the Tribunal was wrong with respect
to its legal interpretation of section 76, it continued with its
analysis. Under this alternative analysis, it assumed that Visa and
MasterCard engaged in price maintenance by implementing the
no-surcharge rule. The Tribunal found in that situation that there
had been an adverse effect on competition.
However, the Tribunal found that even under this alternative
analysis, it would have declined to issue an order, and noted that
the proper solution to the concerns raised by the Commissioner is a
In that regard, it noted that experience in other jurisdictions
showed that concerns would be raised by consumers regarding
surcharging and that rather sooner than later, intervention would
have to take place by way of regulation.
The Tribunal has indicated that it's reasons are
confidential at this time and that a public version of the decision
will issue as soon as possible after a determination as to what
information must remain confidential has been made. The
Commissioner indicates that it is reviewing the decision and
considering next steps.
Given the suggestion that the proper solution to the concerns
raised by the Commissioner is a regulatory framework, the views of
Jim Flaherty, Minister of Finance (Canada), will be very important.
In recent years, the Government of Canada has introduced a number
or measures focused on consumer rights in respect of financial
services, including a Code of Conduct for the Credit and Debit Card
Industry in Canada. Following the publication of the decision, the
Minister indicated that he will be carefully reviewing the
Competition Tribunal's decision and also monitoring any
potential appeal. In addition, he added: "Recognizing the
importance of this issue to all involved, I have also asked that a
special meeting be convened of the Government's FinPay
Committee – a consultative committee on payments issues that
includes representatives from the credit card industry, small
business, retailers, consumers, and many more – to discuss
this matter and next steps."
We will be monitoring developments and reporting on relevant
events as they occur.
The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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