Summary of Commission Decision

of 29 April 2019

relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement

(Case AT.39398 — Visa MIF)

(notified under document number C(2019)3034)

(Only the English text is authentic)

(2019/C 299/06)

On 29 April 2019, the Commission adopted a decision relating to a proceeding under Article 101 of the Treat on the Functioning of the European Union and Article 53 of the EEA agreement. In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, having regard to the legitimate interest of undertakings or associations of undertakings in the protection of their business secrets.

1. INTRODUCTION

(1) The Decision makes legally binding the commitments offered by Visa Inc. and Visa International Service Association (‘Visa International’) (together ‘Visa’) under Article 9 of Council Regulation (EC) No 1/2003 (‘Regulation (EC) No 1/2003’) in a proceeding under Article 101 of the Treaty on the Functioning of the European Union (‘the Treaty’) and Article 53 of the EEA Agreement.

(2) This Decision concerns Visa's rules on inter-regional multilateral interchange fees (‘MIFs’) applicable to card-based inter-regional transactions concluded at merchants located in the EEA with consumer debit and credit cards issued by an issuer located outside the EEA.

2. CASE DESCRIPTION

2.1. Procedure

(3) On 6 March 2008, the Commission opened proceedings with a view to adopting a decision under Chapter III of Regulation (EC) No 1/2003. The Commission adopted a Statement of Objections (‘SO’) on 3 April 2009, a Supplementary Statement of Objections (‘SSO’) on 23 April 2013 and a further SSO on 3 August 2017, setting out its competition concerns relating to Visa's inter-regional MIFs. The SO and the SSOs constitute a preliminary assessment for the purposes of Article 9(1) of Regulation (EC) No 1/2003.

(4) On 20 November 2017, Visa replied to the SSOs in writing. On 27 and 28 February 2018, an Oral Hearing took place.

(5) On 26 November 2018, Visa submitted commitments (‘the Commitments’) to the Commission.

(6) On 5 December 2018, the Commission published a notice in the Official Journal of the European Union pursuant to Article 27(4) of Regulation (EC) No 1/2003 (‘Article 27(4) Market Test Notice’), summarising the case and the Commitments and inviting interested third parties to give their observations on the Commitments within one month following publication.

(7) On 29 January 2019, the Commission informed Visa of the observations received from interested third parties following the publication of the Article 27(4) Market Test Notice.

2.2. The Commission's competition concerns

(8) Visa sets rules on inter-regional MIFs that apply to inter-regional transactions concluded at merchants located in the EEA with consumer debit and credit cards issued by an issuer located outside the EEA. In the case of inter-regional transactions, the issuer (the cardholder's bank) and the acquirer (the merchant's bank) can also set the interchange fees in bilateral agreements (including where the issuer is outside the EEA and the merchant is located in the EEA). However, Visa has stated that inter-regional bilateral agreements are rare.

(9) In the SO and the SSOs, the Commission took the preliminary view that Visa, as the representative of an association of undertakings, has infringed Article 101(1) of the Treaty and Article 53(1) of the EEA Agreement by collectively setting rules on MIFs that apply to card-based inter-regional transactions with consumer debit and credit cards issued by an issuer located outside the EEA at merchant outlets located in the EEA. These include ‘card present’ or ‘CP’ transactions (in-store transactions when the cardholder is present in a shop) and ‘card not present’ or ‘CNP’ transactions (on-line transactions when the card number and authentication details are transmitted via internet, mail or telephone).

(10) In the SO and the SSOs, the Commission took the preliminary view that Visa's rules on inter-regional MIFs constitute a decision by an association of undertakings that has as its object and effect an appreciable restriction of competition in the market for acquiring card payments within the EEA.

(11) In the SO and the SSOs, the Commission came to the preliminary conclusion that Visa's rules on inter-regional MIFs amount to horizontal price-fixing. The inter-regional MIFs fix a significant component of the price charged to merchants for acquiring services through the Merchant Service Charges (MSCs). The Commission came to the preliminary conclusion that the restriction of competition on price follows from the very substance of Visa's rules on inter-regional MIFs. The Commission also came to the preliminary conclusion that the objective of Visa's rules on inter-regional MIFs is to fix a part of the price charged to merchants and to restrict competition to the benefit of Visa and its members/licensees, primarily the issuers. Such price fixing is by its very nature harmful to competition and reveals in itself a sufficient degree of harm to competition to be considered a restriction of competition ‘ by object ’.

(12) In the SO and the SSOs, the Commission also came to the preliminary conclusion that Visa's rules on inter-regional MIFs have the effect of restricting competition in the market for acquiring card payments within the EEA. According to the Commission's SO and SSOs, Visa's inter-regional MIFs apply directly to almost all inter-regional transactions made at merchants in the EEA. They determine a significant component of the price charged to merchants for acquiring services through the MSC, therefore limiting the acquirers' scope for reducing and differentiating their MSCs, and acquirers pass them on to merchants. Therefore, inter-regional MIFs have a direct impact on prices by inflating MSCs.

(13) In the SO and the SSOs, the Commission came to the preliminary conclusion that the restrictive object and effect of Visa's rules on inter-regional MIFs appear to be further reinforced by the following factors, amongst others: inter-system competition that results in high MIFs (the higher the Visa MIF, the more attractive it becomes for an issuer to issue Visa cards), lack of downward pressure by acquirers on MIFs, and merchants' lack of countervailing bargaining power to constrain the level of MIFs. As regards acquirers, the Commission took the preliminary view that they appear to be indifferent to the MIFs because MIFs apply equally to all acquirers, which allows them to pass on the common MIF cost to the merchants.

(14) In the SO and the SSOs the Commission took the preliminary view that Visa's rules on inter-regional MIFs are not objectively necessary.

2.3. The Commitments

(15) The key elements of the Commitments offered by Visa on 26 November 2018 are the following.

(16) Six months following the date on which Visa receives formal notification of this Decision, Visa commits to cap the MIFs for all consumer card-based payment transactions as follows: a) Inter-regional Debit MIF for Inter-regional Card Present (CP) Transactions at 0,2 %; and b) Inter-regional Credit MIF for Inter-regional Card Present (CP) Transactions, at 0,3 %; and c) Inter-regional Debit MIF for Inter-regional Card Not Present (CNP) Transactions at 1,15 %; and d) Inter-regional Credit MIF for Inter-regional Card Not Present (CNP) Transactions at 1,50 %.

(17) At the latest within 12 working days from the notification of this Decision, Visa will notify each acquirer of Visa inter-regional transactions and will request that each acquirer, in turn, notify promptly their respective merchant customers that: i) the Commitments have been adopted and that ii) the Inter-regional MIFs will be capped for all future consumer debit and credit card inter-regional transactions for the duration of the Commitments.

(18) At the latest within 12 working days from the notification of this Decision, Visa will publish, in a clearly visible and easily accessible manner on the Visa Europe website, all inter-regional debit and credit MIFs applicable to inter-regional CP transactions and inter-regional CNP transactions subject to the Commitments. This obligation remains in force through the duration of the Commitments.

(19) Visa shall not circumvent or attempt to circumvent the Commitments either directly or indirectly by any act or omission. In particular, as of the notification of this Decision, Visa will refrain from all practices which have the equivalent object or effect of inter-regional MIFs. This includes specifically but not exclusively implementing programs or new rules whereby Visa transfers scheme or other fees charged to acquirers within the EEA to non-EEA issuers.

(20) Subject to its commitment of non-circumvention, Visa may adopt appropriate consumer protection measures to ensure that consumers will not be adversely affected by the effects of changes to its inter-regional MIFs in particular concerning matters such as fraud, currency conversion, refunds and charge backs.

(21) Visa shall appoint a Monitoring Trustee to monitor Visa's compliance with the Commitments. Before appointment, the Commission will have the power to approve or reject the proposed Trustee.

(22) The Commitments will remain in force for a period of five years and six months after notification of this Decision to Visa.

3. CONCLUSION

(23) The Commitments adequately address the concerns expressed in the SO and the SSOs.

(24) For each type of inter-regional transaction (that is CP and CNP, debit and credit), the MIF caps proposed by Visa do not clearly appear to be in excess of the requirements of the MIT ( 2 ) . The evidence on the file indicates that for inter-regional CP transactions, a per transaction MIF of 0,2 % for debit cards and of 0,3 % for credit cards could make merchants, taken together, indifferent between accepting a cash payment and a card payment. For inter-regional CNP transactions, the evidence on the file indicates that a per transaction MIF of 1,15 % for debit cards and of 1,5 % for credit cards could make merchants, taken together, indifferent between accepting a non-SEPA bank transfer or an e-money transfer and a card payment.

(25) The Commitments therefore deal with the preliminary competition concerns identified by the Commission in an efficient manner, as they provide a direct and tangible benefit to merchants and ultimately consumers in the form of MIFs that are substantially lower than the currently applicable levels.

(26) The Commitments contain a far-reaching non-circumvention clause, which prohibits Visa from engaging in any conduct that would directly or indirectly, by act or omission, have the equivalent object or effect of inter-regional MIFs. This includes, but is not limited to, the introduction of fees which are legally or economically equivalent to inter-regional MIFs. This is similar to the 2010 and 2014 Visa commitments. In the same way as in those commitments, new fees or increased scheme fees equivalent to inter-regional MIFs are covered by the non-circumvention clause.

(27) The Commitments' definitions of ‘Card-Based Payment Instrument’ and ‘Card Present Transactions’ exclude manipulations whereby the card scheme can re-define CP transactions as CNP transactions, as they clearly specify under which conditions CP transactions take place. Nevertheless, if such manipulation were to occur, this would be considered a breach and circumvention of the Commitments.

(28) The Commission considers that the five-years and six-month duration of the Commitments is sufficient to address adequately the concerns expressed in the SO and the SSOs. Given that the Commitments provide for an implementation period of six months, the ‘net’ duration of the Commitments will effectively be five years.

(29) In the light of the Commitments, the Commission considers that there are no longer grounds for action on its part and, without prejudice to Article 9(2) of Regulation (EC) No 1/2003, the proceedings in this case should therefore be brought to an end.

(30) The Commission retains full discretion to investigate and open proceedings under Article 101 of the Treaty and Article 53 of the EEA Agreement as regards practices that are not the subject matter of this Decision.

(1) OJ L 1, 4.1.2003, p. 1.

(2) When analysing MIF levels, regard should be had to the Merchant Indifference Test (‘MIT’), a methodology originally developed in economic literature and then further developed by the Commission to assess efficient interchange fees. The Commission uses this methodology as a benchmark or proxy for assessing compliance with Article 101(3) of the Treaty so as to ensure that merchants benefit from card acceptance.