Visa Europe Accused of Antitrust Violations by EU (Update2) - Bloomberg.com

By John Rega

April 6 (Bloomberg) -- Visa Europe Ltd. was charged with anticompetitive behavior by European Union regulators over payment-card fees after failing to cut its levies as much as MasterCard Inc. did to settle a similar case last week.

The company’s fee guidelines prevent competition among Visa-issuing banks and drive up the costs for stores accepting credit cards, the European Commission said today in a statement.

Five days after settling with MasterCard, Competition Commissioner Neelie Kroes is seeking further fee reductions on the 1.6 trillion euros ($2.1 trillion) of annual card payments in the region. Visa Europe, the operator of the largest card network in the region, must convince the commission its arrangement benefits consumers.

“I’m just staggered by this on a point of principle,” Visa Europe Chief Executive Peter Ayliffe told reporters on a conference call, adding he was “disappointed” not to at least reach a settlement on fees for debit cards.

Ayliffe said his point of principle was that the commission compared the economics of Visa cards versus using cash, rather than other forms of credit.

“We’ve got quite a bit of evidence,” he said, that Visa’s card systems save money for consumers. He declined to specify numbers on the grounds that they will be the basis of his defense.

Payment Systems

Visa Europe, like MasterCard, also argues that transaction fees are necessary to defray the costs of payment systems that benefit consumers and the economy.

The European Retail Round Table, an advocacy group for retailers that includes Wal-Mart Stores Inc. and Carrefour SA, has complained that the fee at issue raises costs by 13.5 billion euros a year.

The so-called interchange fee is based on the card company’s guidelines. It’s paid by the retailer’s bank to the bank that issued the customer’s card. The terms of last week’s MasterCard settlement will reduce fee revenue by 2.6 billion euros, halving the profitability of issuing cards, the Lafferty Group research and consulting firm estimated.

MasterCard, in its settlement, cut its credit-card fees to 0.30 percent per transaction, from a range of 0.80 percent to 1.90 percent in 2007. Debit-card fees were reduced to 0.20 percent, from at least 0.40 percent and in some cases more than 0.75 percent. The commission said the changes will save consumers 200 million euros a year.

Credit-Card Fees

Visa Europe on March 11 cut its credit-card fees to an average of 0.61 percent, from 0.7 percent, while debit-card transaction costs fell to an average of 18 euro cents per transaction, from 28 cents.

The commission said Visa Europe also restricts competition by requiring retailers to take any card without adding a surcharge, and by setting a flat fee for merchants that doesn’t make a distinction between the types of cards used.

The agency has the power to force antitrust violators to change their practices and impose fines of as much as 10 percent of yearly sales.

Visa Europe separated from Visa Inc. before the U.S. card company’s initial public offering a year ago. The London-based company, which is owned by its member banks, has sought an agreement with the commission on interchange since a previous settlement expired at the end of 2007.

To contact the reporter on this story: John Rega in Brussels at jrega@bloomberg.net.
Last Updated: April 6, 2009 12:58 EDT