Notice pursuant to Article 19(3) of Council Regulation No 17 - Case COMP/D1/29.373 - Visa International (Text with EEA relevance)
Date: 2000-10-14
Institutions: European Commission
Subjects: bank, distributive trades, electronic money, inter-company agreement, international agreement, law of banking

C 293/18

EN

Official Journal of the European Communities

14.10.2000

Notice pursuant to Article 19(3) of Council Regulation No 17 (1)

Case COMP/D1/29.373 (cid:151) Visa International

(2000/C 293/16)

(Text with EEA relevance)

1. INTRODUCTION

1. On 31 January 1977 Ibanco Ltd, known as Visa Inter-
national since 1979, notified its international payment
card scheme (By-Laws and Operating Regulations) to the
Commission, applying for negative clearance or,
in the
alternative, an exemption under Article 81(3).

members established in its region and setting, by default,
the level of the interchange fee applicable in its territory. In
countries with so-called Visa national group members, the
EU board has delegated the power
to develop and
administer Visa card programmes to these members.

the Commission,

2. After having initially sent a comfort letter on 29 April
1985,
following a complaint by the
British Retail Consortium against the so-called interchange
fee in the Visa International payment scheme, reopened the
investigation in the Visa case and the comfort letter was
withdrawn on 4 December 1992. The reopened investi-
gation also took into account a complaint, filed on 23
May 1997 by Eurocommerce, a retail, wholesale and inter-
trade representation in the European Union,
national
inter alia the Visa Inter-
concerning various aspects of
national payment card scheme.

2. THE PARTIES

2.1. Visa International

3. Visa International Service Association ((cid:145)Visa(cid:146)) is a privately
held,
for-profit corporation owned by 21 000 member
financial institutions from around the world. Visa, which
is incorporated in the USA, operates the card system
network. To that end it manages trade marks, sets down
the rules of the system and provides authorisation and
clearing services via a worldwide computer and telecom-
munication network, called VisaNet. Visa itself does not
issue Visa cards to cardholders nor contracts merchants
for Visa card acceptance, but its member financial
insti-
tutions, who received a licence to that end from Visa, do.

4. Visa has divided the territory in which it is active into six
regions worldwide.
In the Visa EU region, which covers
apart from the EU also the EFTA countries Iceland, Liech-
Israel, Cyprus and Malta,
tenstein and Norway, Turkey,
there are over 5 000 Visa members. Decision making is
delegated to the Visa EU regional Board of Directors, which
is elected every two years from Visa member financial
institutions in the EU region. The EU regional board is
responsible for intra-regional affairs, such as the adoption
(e.g.
of
the Visa EU Regional
regulations
admission and expulsion of
Operating Regulations),

regional

(1) OJ 13, 21.2.1962, p. 204/62.

2.2. The Visa members

5. There are various classes of membership in the Visa
corporation but broadly speaking all classes of membership
are open to any
the
commercial banking laws of its own country and auth-
orised to accept demand deposits. However, Visa shall
not accept for membership any applicant that is deemed
by the Board of Directors to be a competitor of
the
corporation.

institution organised under

in

the

and

EU are

principal

6. The main classes of membership relelvant to Visa card
activities
associate
membership. A principal member issues cards and may
acquire merchants and carry out all the activities associated
therewith, either directly or by contract with other
members. An associate Visa member must be sponsored
by a principal member.
the
functions of a principal pursuant to its agreement with
the principal. Only principal members pay service fees to
Visa and are entitled to vote.

It can then carry out all

authorised

to exercise

a princiapl member

7. In some Member States there is a Visa group member. This
is
its
membership rights and operate Visa card programmes
through its owners or members. Members of Visa group
members are associated members. The Visa group member
is responsible for acts and omissions of
its owners or
members. The following Member States have a Visa
group member: Austria (Visa Austria), Belgium (Visa
Belgium), Denmark (PBS), Finland (Luottokunta Kreditlag),
France (Groupement Carte Bleue), Luxembourg (VisaLux),
Spain (Sistema 4B and Visa Espana) and Sweden (Visa
Sweden Association). None of
these group members,
themselves.
from Luottokunta,
apart
Most group members, apart from Luottokunta, PBS and
Visalux, do not acquire either.
their
members do.

Instead (some of)

issue Visa cards

8. As said above, Visa has delegated to certain Visa group
Members the power to develop and administer Visa card
programmes. These are all Visa group members, except
Visalux in Luxembourg and Sistema 4B in Spain, referred
to by Visa as national group members. These national group
members act as a national Visa, authorised to adopt rules
applicable to the operation of Visa programmes in their
country, provided these local arrangements do not infringe
the Visa By-Laws and Operating Regulations.

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Official Journal of the European Communities

C 293/19

9. The national group member decides on applications for
licences to issue and acquire Visa cards in its territory.
Visa retains the right to accept an eligible institution as a
direct member of Visa if a national group member for
institution to
some reason is unwilling to license that
carry out Visa card activities. National group members
also have to give their consent to the establishment of
foreign branches in their territory (see also hereinafter).
The Visa EU board can accept new members
in all
countries directly if membership has been (cid:145)unreasonably
withheld(cid:146) by a national group member or if the national
group member
direct
membership.

to Visa

consents

granting

3. THE MARKET

3.1. The functioning of the Visa payment scheme

10. The visa notification concerns the operation of payment
card systems. Broadly speaking, Visa cards can be used
either to pay a merchant
for goods or services or to
obtain cash, either from a bank counter or from an
ATM. In the first case four parties are involved: the Visa
cardholder, the issuing bank (which issues the card to the
cardholder), the merchant and the acquiring bank (which
acquires merchants for Visa card acceptance) (1).
In the
second case, only three parties, the Visa cardholder, the
issuing bank and the ATM operator are involved.

11. Before being able to use a card for payment or cash with-
drawal transactions, a consumer needs to contract with an
issuing bank to receive a card. This is done usually in
exchange for an annual fee paid by the cardholder to the
issuing bank. Moreover, with regard to a payment trans-
action a merchant has to conclude a contract with an
acquiring bank for card acceptance. This contract sets the
merchant fee and other conditions.

12. A card payment transaction involves the following steps: (i)
the cardholder and the merchant agree on a price for the
relevant goods or service, including a possible surcharge;
(ii) the card is inserted in a device (e.g. terminal) which
may check if the card is valied, and if the transaction is
pre-authorised by the issuer; (iii) the transaction is then
cleared and settled at the inter-bank level, this includes
the payment by, typically, the merchant bank to the card-
holder bank of an interchange fee; (iv) the merchant bank
and the cardholder bank may charge their customers a
transaction related fee.

13. It follows from the above that in a payment transaction a
distinction can be made between two services, i.e. on the
one hand issuing cards to customers and on the other
hand acquiring merchants
In a
four-party transaction both services are often provided by
different entities.

for cards acceptance.

14. A card cash withdrawal transaction involves steps similar
to those described as to payment transactions. The main
difference is that there is no merchant involved in such a
transaction but the operator of the ATM from which cash
is withdrawn.

3.2. Position of Visa on the market

on

active

payment

organisations

(through Europay),

15. Apart from Visa, there are currently the following major
international
the
European market: Europay International and MasterCard
International
Japan Credit Bureau
(JCB) and the international proprietary systems American
these inter-
Express and Diners Club International. Of
national payment organisations Europay (in close coop-
important
eration with MasterCard)
competitor of Visa
and
Europay account for around 90 % of international cards
issued in the EU. The position of Visa (about 53 %) is in
general stronger than that of Europay (about 33 %), but
there are important differences between the Member
States (2). Visa is
strong in UK, Spain,
France and Italy. Europay on the other hand is stronger,
for example, in Germany, the Netherlands and Austria.

is by far the most
in Europe. Together Viosa

in particular

16. Apart

from international payment card operators, also
various national payment card operators are active in the
different Member States.

3.3. Intra-system competition

3.3.1. Issuing Visa cards

17.

In most Member States Visa cards are issued by several
banks, either directly as a principal or associate Visa
member or as a member of a group member. The
issuers varies per Member State. Only in
number of
Finland is there just one Visa issuer,
the national
group member Luottokunta. In some countries, such as
Ireland,
the UK and France, Visa cards are also issued
through foreign branches.

i.e.

3.3.2. Acquiring merchants for Visa card acceptance

acquirer

18. Visa acquiring activities are generally more concentrated,
but the number of actual acquirers varies from country to
country. For example, in the UK there are quite a lot of
Visa acquirers, while there is de facto only one single
principal Visa
sole
acquirer for both Visa and for Europay) and Finland (Luot-
tokunta,
the sole acquirer for Visa and Europay trans-
actions). In the other Member States with a Visa group
member
and
Sweden), not the group members themselves but several
of their members acquire merchants for Visa transactions.
in practice the acquiring business is often
Nevertheless,

(i.e. Austria, Belgium,

in Denmark (PBS,

France

Spain,

the

(1) It may be that for a particular transaction in a four-party system the
issuer also happens to be the acquirer. Such a transaction is known
as an (cid:145)on-us(cid:146) transaction, and can be represented as a three-party
diagram.

(2) Moreover, it has to be kept in mind that cards are not available in a
large scale in all Member States. For example,
for
payment cards is much more developed in the United Kingdom,
Germany, France and Spain than in Denmark, Finland, Austria,
Greece and Ireland.

the market

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Official Journal of the European Communities

14.10.2000

in the
dominated by one single acquirer. For example,
the most
Netherlands VSB International
important acquirer,
in
Belgium around 90 % of all transactions are acquired by
Bank Card Company.

is by
in Portugal Unicre is. Moreover,

far

4. THE AGREEMENTS

4.1. General

19. The notification by Visa concerns rules and regulations
governing the Visa association and its members (i.e. inter-
national by-laws and regional board delegations), as well as
all international provisions relating to Visa’s payment cards
(i.e. the General International Operating Regulations, EU
Regional Operating Regulations, Dispute Resolution Rules
and Card and Marks Specifications). All notified Visa rules
and regulations will hereinafter be referred to as (cid:145)the Visa
rules(cid:146).

relation between Visa members

20. The Visa rules govern primarily the relationship between
Visa and its members, meaning banks issuing Visa cards
and banks acquiring merchants for Visa cards acceptance.
In addition, the Visa rules contain also clauses relevant for
the
inter-bank
the rules contan clauses with
relationship). Moreover,
regard to the relationship between acquiring banks and
merchants (such as the so-called no-discrimination rule
and the honour all cards rule). Visa says it does not seek
to prescribe the arrangements between issuers of Visa cards
and cardholders, beyond laying down the basic charac-
teristics of the Visa card products.

(the

4.2. Specific provisions

4.2.1. The no-discrimination rule (NDR)

21. The NDR in the Visa international card regulations
prohibits merchants from adding charges to cardholders
who pay with their Visa card. In addition, the Visa NDR
prohibits merchants from giving consumers discounts for
paying with other means of payment, such as, for example,
cash. The rule does not apply in countries where it has
been abolished by national competition authorities, i.e. in
the UK, for credit cards, Sweden and the Netherlands.

22. There is a similar rule for cash withdrawals: an acquirer is
prohibited from adding any surcharge to a manual or ATM
cash disbursement transaction, unless local
law expressly
requires
that a Member be permitted to impose a
surcharge.

limited to the country where it has its principal place of
business. However, under some conditions members may
carry out cross-border issuing and cross-border acquiring
activities. The possibilities for such cross-border activities
have been gradually increased by Visa (see hereinafter).

4.2.3. The modified rules on cross-border issuing

in the

territory concerned. There

24. The Visa rules oblige banks wishing to carry out issuing
activities outside their country of domicile in principle to
do so through either subsidiaries, which could join Visa in
their own right, or through the establishment of foreign
two
are
branches
specific exceptions
in two
to this general
situations the establishment of a subsidiary or branch is
first Visa cards could be issued passively,
not required:
without
to cardholders provided the card
account was with the issuing bank in its country of
domicile. Secondly, Visa corporate cards could be issued
to
of multinational
companies.

the world

solicitation,

employees

around

rule,

i.e.

25. In its regional EU board meeting of 26 May 2000, Visa
approved amendments to its cross-border issuing rules,
involving the abolishment of the requirement that a Visa
member should have either a branch or subsidiary in a
Member State in which it wishes to cross-border issue
Visa cards. In order to ensure the continued security and
quality of the Visa system, Visa adopted some minimum
rules, e.g. cross-border issuing will be open for members
who are already proven issuers (in their principal place of
business or in any country), submit a business plan and
comply with certain registered domestic rules. Visa has
stated that, for technical reasons the modified rules on
cross-border issuing are likely to enter into force in the
first half of 2001.

4.2.4. The modified rules on cross-border acquiring

26. The Visa rules allow cross-border acquiring of international
airlines and some other specific categories. Moreover, since
1994 the Visa EU/EFTA cross-border acquiring programme
allows, under similar conditions as the ones mentioned
to cross-border
above for cross-border
acquire merchants without
a
subsidiary or branch in the territory. Initially Visa limited
the programme to certain categories of
international
rental companies, hotels,
merchants only, namely car
ferries and cruise lines. Since 1 January 1999 cross-border
acquiring has been made possible by Visa for all categories
of (cid:145)international(cid:146) merchants, namely merchant operating in
at least two countries in the Visa EU region.

issuing, banks
the

establishment of

4.2.2. The principle of territorial licensing

23. Visa cards may only be issued and acquired by members of
the Visa payment cards system, having obtained a licence
to that end. Visa applies a territorial licensing policy. This
means that, in principle, the Visa member’s jurisdiction to
carry out Visa card issuing and acquiring activities is

27. In its regional EU board meeting of 26 May 2000, Visa
agreed to withdraw the requirement
that a merchant
acquired cross-border, must have an outlet in more than
one country. The appropriate amendments to this effect in
the Visa EU Regional Operating Regulations were approved
to this effect in the Visa EU executive committee meeting
of 7 July 2000. The modified rules on cross-border
acquiring will enter into force on 1 October 2000.

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Official Journal of the European Communities

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4.2.5. No acquiring without issuing

28. Although according to the Visa rules principal members
are formally obliged to issue cards and to acquire
merchants, in practice Visa does not oblige its members
to acquire. However, if they want to acquire merchants for
card acceptance, before starting acquiring activities in a
particular country the Member has to issue a reasonable
number of cards. The target is set on a case by case basis,
taking into account the number of cards issued at that time
in the country in question by existing Visa members and
the potential for Visa cards within that market. In addition,
the applicant are considered.
the size and potential of
According to Visa,
to determine whether a
reasonable number of cards have been issued before cross-
border acquiring activities are allowed, cards issued in any
country of the Visa EU region are taken into account.

in order

an agreement to accept Electron cards are not required to
accept Visa cards. The honour all cards rule applies irres-
pective of the nature of the transaction, the identity of the
issuer, the type of card being used or the personal charac-
teristics of the cardholder.

5. CONCLUSION

30. In view of

the preceding paragraphs,

the Commission
intends to adopt a favourable position concerning the
provisions in the notified agreements referred to above.
Before doing so,
to
submit their observations within one month of the publi-
cation of this notice in the Official Journal of the European
Communities. These observations
should be submitted
quoting reference case COMP/D1/29.373 (cid:151) Visa Inter-
national, by post to the following address:

interested third parties

invites

it

4.2.6. The honour all cards rule

29. A merchant must accept all valid cards with either the Visa
or the Visa Electron symbol which are properly presented
for payment. According
to Visa, merchants whose
agreement requires them to accept Visa cards are not
required to accept Electron cards, and merchants having

European Commission,
Directorate-General for Competition,
Direction D, Unit D1 (Financial Services),
Rue de la Loi/Wetstraat 200,
B-1049 Brussels.

Or by fax (32-2) 296 98 07.