On November 4, 2014, Canada's Minister of Finance, Joe
Oliver, announced that Visa Canada Corporation and MasterCard
Canada, Inc. had submitted separate and individual voluntary
proposals to reduce their net consumer credit card interchange
rates to an average effective rate of 1.50% for a period of 5
years. Visa and MasterCard have committed to start implementing the
reductions no later than April 30, 2015.
All merchants are expected to see a reduction in interchange
rates, however both Visa and MasterCard have committed to focus on
delivering reductions to small merchant categories and
A Response to Threatened Industry Regulation
Visa and MasterCard submitted these proposals in response to the
increasing pressure merchant associations, consumer protection
groups and the Competition Bureau were placing on the Department of
Finance to regulate Canadian credit card networks' interchange
rates. The proposals have successfully averted regulation for the
time being. The Minister of Finance stated that "as a result
of the voluntary proposals, there is no need for the Government to
regulate the interchange rates set by the credit card
The Ministry of Finance will be monitoring Visa and MasterCard
to ensure they comply with their proposals. Such monitoring will
include annual reviews by an independent third party. The Ministry
of Finance expects other credit card networks that may exert market
power in Canada to voluntarily commit to reduce their interchange
rates as well. The Minister warned that, in the event the
interchange rate reductions are not passed on to merchants, the
Government may rescind its acceptance of the proposals. The
possibility of government regulation therefore remains if the
proposals are not ultimately successful in reducing and maintaining
low prices for consumers.
Visa and MasterCard have also indicated that their proposals are
conditional. MasterCard noted that its proposal was based on the
current regulatory structure and that it may need to adapt with
changes in the industry. Visa indicated that it would terminate or
amend its proposal if it or its clients were disadvantaged by
Merchant Acquirers' Role and Future Amendments to the Code
of Conduct for the Credit and Debit Industry
Both Visa and MasterCard emphasized that merchant acquirers must
pass the interchange rate reductions onto merchants in order for
the reductions to achieve their purpose. Visa indicated that it
supports an amendment to the Code of Conduct for the Credit and
Debit Industry which would require merchant acquirers to reduce
their merchant discount rates by at least the same amount as the
interchange rate reductions. In his announcement the Minister
stated that the Government is examining potential changes to the
Code of Conduct which it hoped to announce in the near future.
We are monitoring the progress of the amendments to the Code of
Conduct, which are currently in draft form, and are in contact with
the policy makers. If you have any questions on how the changes to
interchange rates or pending amendments to the Code of Conduct will
affect your business, please contact the authors of this
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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