Earlier today, in a much anticipated decision, the Competition
Tribunal ("the Tribunal") dismissed the Commissioner of
Competition's application challenging Visa's and
MasterCard's rules for credit card acceptance by merchants,
with particular focus on the card acceptance fees charged to
merchants. "Interchange" fees make up a large portion of
the fees charged to merchants for accepting card payments, and
merchants must pay higher interchange fees when consumers use a
premium credit card. While a public version of the decision has not
yet been released, the Tribunal issued a public summary of its
The application alleged that the card acceptance rules
negatively affect competition by requiring merchants to honour all
cards bearing the card network's brand and by prohibiting
merchants from imposing surcharges when certain cards are used. The
Commissioner had objected that the rules prevent merchants from (i)
encouraging customers to use lower-cost forms of payment (for
example debit card or cash payment); (ii) declining to accept
"higher-fee" premium cards that cost more for the
merchant to accept; and (iii) applying surcharges to transactions
where customers use "higher-fee" cards – with the
result being an adverse effect on competition.
In a statement today following the Tribunal's decision, the
Minister of Finance ("the Minister") emphasized the
importance of clear rules and information about payment methods for
the benefit of merchants and consumers. He said he would be
"carefully reviewing the Competition Tribunal's decision
and also monitoring any potential appeal". The Minister also
said he would call a meeting 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".
Key Points from the Decision
The Price Maintenance Provisions Require a
The Tribunal held that:
For the price maintenance provisions of the Competition
Act to apply, there must be a "resale" and that the
Commissioner had not established that the conduct at issue involved
The Commissioner's attempt to apply the price maintenance
language to the rules and fees at issue is "not supported by
the legislative history of the provision".
The "Proper Solution" is a Regulatory
Notwithstanding its view that the price maintenance provisions
did not apply, the Tribunal undertook an alternative analysis (in
which it assumed that the card companies had engaged in price
maintenance) and ultimately concluded that the "no-surcharge
rule" (which prevents merchants from charging more to
consumers who use cards with higher interchange fees) did have the
requisite adverse effect on competition.
Despite reaching this conclusion, the Tribunal indicated that it
would have declined to issue an order in this case. On this
point, the Tribunal stated that, in its view, the
"proper solution to the concerns raised by the Commissioner is
a regulatory framework".
Implications Going Forward
While the public version of the full decision has not been
released, the implications of the case include:
The Tribunal's position is that, consistent with how they
have been applied historically, the price maintenance provisions
are aimed at addressing vertical relationships between suppliers
The Tribunal has indicated that it believes that the
Commissioner's concerns regarding the payment card industry are
better addressed through a regulatory framework than
While the credit cards networks and card issuers (The
Toronto-Dominion Bank and the Canadian Bankers Association
intervened in support of the credit card companies) won this round,
this decision may encourage the government to consider implementing
a broader regulatory framework to address the Commissioner's
As an aside, it is likely worth noting that in places where card
rules and interchange fees have been regulated the anticipated
direct benefit to consumers has not been observed. For example, in
Australia, where interchange fees have been capped for several
years, many claim that the primary effect has been a transfer of
wealth from credit card companies and banks to retailers – as
opposed to lower prices for consumers.
The Commissioner has 30 days to decide whether to appeal the
decision to the Federal Court of Appeal.
The Tribunal's public summary of its decision can be found
Our earlier discussion of this case can be found
Our summary of the implications of the credit card code of
conduct can be found
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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