Dec 16, 2010
Reaction fast, swift and varied to Competition Bureau's challenge of Visa, MasterCard rules
OTTAWA--The Canadian Federation of Independent Business (CFIB) welcomes the Competition Bureau's application with the Competition Tribunal to strike down Visa and MasterCard rules imposed on Canadian merchants.
CFIB first proposed a Code of Conduct for the credit and debit card industry in Canada to give merchants more power in their relationship with credit card companies and banks. Government ultimately adopted most of CFIB's recommendations in its Code which went into effect in August 2010.
"The Code is working and has made major progress in protecting Canada's low cost debit card environment," said Dan Kelly, CFIB's senior vice-president in Ottawa. CFIB's original version of the Code also called for the power for merchants to surcharge and ultimately refuse certain higher cost premium cards, like Visa's Infinite brand. "It is great news that the Competition Bureau is challenging these rules and we believe this would help address very high credit card merchant fees. CFIB believes that fixing these provisions would be a great addition to the Code."
As Canada's largest association of small- and medium-sized businesses, CFIB is Powered by Entrepreneurs™. Established in 1971, CFIB takes direction from more than 107,000 members in every sector nationwide, giving independent business a strong and influential voice at all levels of government and helping to grow the economy.
Retail Council of Canada commends Competition Bureau for referring card company conduct to Competition Tribunal
The Retail Council of Canada (RCC) applauded actions taken today by the Competition Bureau to file an application with the Competition Tribunal to strike down restrictive and anti-competitive rules that Visa and MasterCard impose on merchants who accept their credit cards.
"This is the beginning of the end for the wild west mentality of Canada's unregulated payments industry," said Diane Brisebois, President and CEO of Retail Council of Canada. "The actions taken today by the Bureau are an important step in the fight for clarity, transparency and accountability in Canada's payments market."
RCC is encouraged that the Competition Bureau has responded to the concerns it has voiced on behalf of merchants of all sizes across the country. Working with industry partners such as the Canadian Council of Grocery Distributors (CCGD) and backed by more than 250,000 Canadian merchants across the country, RCC has pushed for a robust regulatory framework for the card companies and the payments industry for a number of years.
"As the Bureau notes, Canada has some of the highest credit card fees in the world," David Wilkes, SVP, Canadian Council of Grocery Distributors said. "This is an important acknowledgment that the monopolistic practices of the payment industry are costly to consumers and retailers."
RCC also acknowledges the positive impact of the process started by Finance Minister Flaherty in issuing the Code of Conduct for debit and credit card industry. The action taken by the Bureau today will continue to bring incremental progress toward much needed regulation of this market in Canada.
Competition Bureau lawsuit will unintentionally punish consumers, enrich large retailers, Visa says
"Visa is disappointed that the Canadian Competition Bureau has taken an anti-consumer position by filing a lawsuit against Visa to overturn policies that protect consumers from being punished by large retailers who seek to impose surcharges and take away consumer choice at the checkout counter. We intend to vigorously defend our pro-consumer provisions.
"Visa's no surcharging protection was created specifically to shield consumers from retailers who seek to impose checkout fees and penalize consumers who choose the convenience, security and reliability of Visa over cash and cheques.
"Merchants already have numerous options available to help manage costs, while receiving all the benefits of electronic payments. Visa's policies do not preclude retailers from offering an incentive to customers to use different forms of payment and offering discounts to consumers who pay with the retailer's preferred payment method whether it be cash, cheque, debit or another credit card payment network. Additionally, a November 2009 consumer survey by the Consumers' Association of Canada found that 90 per cent of Canadians oppose permitting retailers to impose surcharges, with 75 per cent strongly opposing surcharging.
"In those few countries that permit surcharging today, such as Australia and the United Kingdom, evidence indicates that many large retailers profit from the fees by shifting the cost of doing business onto consumers. For example, in Australia, where the law requires that surcharging be permitted, many retailers in fact charge consumers more than the cost of card acceptance, turning surcharging into a profit centre for large retailers at the expense of consumers.
"Visa's honour all cards protection was put in place to prevent merchants from reaching into consumers' wallets and dictating which payment products they can use. The policy requires that a merchant who accepts Visa Credit products for payment must accept all cards within this category. Removing this pro-consumer policy will lead to consumer confusion and eliminate consumer choice at the point-of-sale.
"Visa does not have a non-discrimination provision.
"Visa is also disappointed that the Bureau, which aims to foster a competitive and innovative marketplace, chose to discriminate against Visa and MasterCard alone, ignoring higher priced competitors such as American Express. If the Bureau is successful, consumers will be harmed, the flow of commerce will be slowed and an unlevel playing field created.
"Visa will defend our no-surcharge and honour all cards protections as they ensure fair business practices for Visa and retailers, while preserving consumer choice at the checkout counter."
MasterCard says challenge will "enrich merchants at the expense of consumers"
MasterCard Canada said today that the Canadian Competition Bureau's challenge of MasterCard Canada's rules, including its no surcharge rule, which prohibits merchants from charging customers extra when they pay with MasterCard credit cards, and its honour all cards rule, which prevents merchants from discriminating against different types of MasterCard credit cards, would, if successful, have negative consequences for Canadian consumers. The company believes that the Competition Bureau's legal claims are without merit and will ultimately be rejected by the Competition Tribunal.
"If these changes were implemented by the Competition Bureau, the result would be to enrich merchants at the expense of consumers," said Betty DeVita, President, MasterCard Canada.
MasterCard Canada's prohibition against credit card surcharging is a rule that protects consumers. It applies to Canadian merchants that accept MasterCard credit cards and protects consumers by preventing merchants from imposing an additional fee on consumers who choose to pay with a MasterCard card. The rule has been in place in Canada for more than 35 years.
Australia provides an excellent example of how surcharging harms consumers. Since the Reserve Bank of Australia allowed surcharging in 2003, there has been increasing and unjustified surcharging of consumers by certain merchants. In the U.S., credit card surcharges are banned in 10 states, including New York, California, Florida and Texas. The practice is also outlawed in 17 European Union Member States, including France, Spain, Germany, Austria and Sweden.
Under MasterCard Canada's rules, merchants are free to offer discounts or other inducements to customers who pay by cash, debit or any other means as a way to reduce their costs of credit card acceptance. MasterCard Canada is of the view that this gives merchants the pricing flexibility they require, while protecting consumers from the negative consequences of surcharging. These include practices that have been observed in Australia, including "bait and switch" pricing tactics and price-gouging.
MasterCard Canada's honour all cards rule prevents merchants from picking and choosing which MasterCard credit cards they will accept. If the Bureau were successful in challenging this rule, it would mean that consumers would not know if their MasterCard credit cards would be accepted until they attempted to make a purchase, even though the merchant displayed the MasterCard acceptance logo. This could undermine consumers' confidence in, and their ability to use, MasterCard cards as a form of payment. No jurisdiction in the world has banned the honour all cards rule.
MasterCard Canada intends to defend its no surcharge and honour all cards rules in the proceeding before the Competition Tribunal and looks forward to demonstrating how its rules benefit both consumers and merchants in Canada. The Competition Bureau does not seek any penalty or damages from MasterCard.
Canada's credit card industry helps facilitate more than $240 billion in commerce annually for Canadian merchants, big and small. Merchants pay a relatively small fee for participating in the credit card system. In return for this fee, merchants enjoy significant value, including increased sales, guaranteed, secure and nearly immediate payments, and access to millions of Canadian and hundreds of million U.S. and other cardholders both in-store and online.
MasterCard Canada believes merchants should pay their fair share of the cost of credit cards, and should not be able to pass on these costs to consumers through higher prices.
Consumers will be the big losers under the Competition Bureau's plan, Cran says
Bruce Cran, President of the Consumers Association of Canada, has made the following statement in response to today's decision of the Competition Bureau to challenge two rules of Visa and MasterCard:
"The Consumers Association of Canada is extremely disappointed in today's decision by the Competition Bureau to challenge two critical consumer protection measures. This is a disappointing day for Canadian consumers. The Competition Bureau appears to have abandoned our interests in favour of the well-organized merchant lobby.
Allowing merchants to surcharge on credit card purchases will expose consumers to potentially predatory practices by merchants. For example, in Australia where surcharging was forced by the regulator, the result has been extremely negative for consumers. A recent report by the Australian consumer group Choice showed that consumers are now facing surcharges of up to 10% in some cases. The report also found that some merchants have embraced surcharges as a new revenue stream. The report highlighted that surcharging was most prevalent in situations where paying by credit card is a necessity. For example, Australia's largest domestic airline now imposes surcharges as high as $30.00 per ticket.
If the threat of facing surcharges is not bad enough, the Bureau apparently now wants to take away the honour all cards rule. This will create chaos in the marketplace for consumers because they will no longer have any guarantee that their credit card will be accepted when they get to the check-out counter. If a merchant advertises that they accept a Visa credit card they should have to accept any Visa credit card that a consumer carries. Allowing merchants to decline individual consumers' cards would create confusion and frustration for consumers.
Merchants across Canada have been instrumental in driving consumers to use electronic payments - and in many cases offer no other alternative - and now they want consumers to pay extra to do so and/or dictate which particular Visa or MasterCard credit card is acceptable to them."