Commission accepts binding commitments from Visa in relation to interchange fees


On 8 December 2010, the European Commission announced that it had accepted commitments offered by Visa Europe to make significant reductions to the level of its cross border and certain domestic multilateral interchange fees (“MIFs”) for consumer immediate debit card payments in the EEA. The commitments also include measures intended to increase transparency and competition. The Commission will continue to investigate Visa’s MIFs for consumer credit and deferred debit card transactions.


Interchange fees
When a customer buys goods or services with a payment card under certain four-party payment systems, such as those operated by Visa and MasterCard, the merchant pays the acquirer (the financial institution that accepts payments on behalf of the merchant) a merchant service charge (“MSC”). The acquirer in turn pays the issuer (the financial institution that issues the customer’s card) an interchange fee. Interchange fees may be agreed either on a bilateral basis, between issuers and acquirers, or on a multilateral basis, where the fee is applicable to all financial institutions participating in the payment card scheme. Financial institutions also pay scheme fees to the operator of the payment card scheme.

Article 9 commitments
Article 9 of Regulation 1/2003 enables the Commission to accept commitments from undertakings in relation to an investigation under Article 101 or 102 of the Treaty on the Functioning of the European Union (“TFEU”). The case must be one where the Commission intends to adopt an infringement decision, and the commitments must address the Commission’s competition concerns as set out in its preliminary assessment. A commitments decision will specify that there are no longer grounds for action by the Commission, although if undertakings breach such commitments the Commission may reopen the investigation and the undertakings may also face fines of up to 10% of their turnover.

Visa investigation
The Commission initiated proceedings in March 2008 in relation to Visa Europe’s MIFs for cross border point of sale transactions using Visa branded consumer payment cards within the EEA. It had previously considered Visa’s MIFs and had granted an exemption under Article 101(3) in 2002, which had expired at the end of 2007. In April 2009, the Commission sent a Statement of Objections (“SO”) to Visa Europe, stating its view that the cross border and certain domestic MIFs set directly by Visa Europe in the EEA for point of sale transactions with consumer payment cards infringed Article 101, as they had as their object and effect an appreciable restriction of competition in the acquiring markets. The Commission’s preliminary view was that the MIFs seemed to inflate the basis on which acquirers set the MSC, as a large part of the MSC is determined by the MIF.

Visa Europe submitted proposed commitments to the Commission on 26 April 2010. The main commitment was a cap on its yearly weighted average cross border MIFs for consumer immediate debit cards at 0.2%. The proposed commitments also included Visa Europe continuing to implement and improve transparency measures that it had introduced in March 2009, including continuing to operate a rule against blending MSCs applicable to more than one payment card system or type of Visa Europe card and publishing all cross border and domestic MIFs on its website. The proposed commitments would be in place for four years and compliance would be monitored by a Monitoring Trustee.

Following market testing of the proposed commitments, Visa Europe submitted revised commitments to the Commission in September 2010. The revised commitments included aligning the Monitoring Trustee provisions with the Commission’s usual practice and making the published MIFs easier to find on Visa Europe’s website. The Commission considered that the revised commitments were appropriate and necessary to address the competition concerns expressed in its SO, but were not disproportionate.

The reduction in the MIF incorporated in Visa Europe’s commitments is intended to reflect the “merchant indifference test”, according to which interchange fees should be set at a level so that the MSCs on average do not exceed the transactional benefits accruing to merchants through the acceptance of payment cards. The Commission noted that the calculation of the cap might need to be altered if new information became available on the respective costs of cards and cash. The Commission has stated that it intends to carry out a study in this area.

MasterCard proceedings
The Commission has also investigated MIFs for payment card transactions under the MasterCard scheme. In December 2007, the Commission issued a prohibition decision, finding that MasterCard’s MIFs for cross border debit and consumer credit card transactions in the EEA restricted price competition between acquiring banks, in breach of Article 101(1). The Commission concluded that the conditions of Article 101(3) were not fulfilled, although it noted that they could in principle be satisfied. The Commission did not impose a fine, as the arrangements had previously been notified, but it ordered MasterCard to withdraw the fees within a six month period or incur a daily penalty payment of 3.5% of turnover.

MasterCard appealed the decision to the General Court in March 2008. In June 2008, MasterCard provisionally repealed its cross border MIF, but subsequently increased its scheme fees. In April 2009, MasterCard gave three undertakings to the Commission, to apply for the period of the appeal: (i) changing its methodology for calculating its cross border MIFs, based on the merchant indifference test, which resulted in substantially reduced average weighted MIFs (0.3% for consumer credit and 0.2% for consumer debit cards); (ii) repealing its October 2008 scheme fee increases; and (iii) adopting transparency measures including offering unblended rates. In light of these undertakings, the Commission considered that it would not be appropriate to pursue MasterCard for non-compliance with the 2007 decision.

Visa Europe’s commitments do not cover the entirety of the Commission’s investigation into Visa’s interchange fees. The Commission has stated that it will continue its investigation into Visa Europe’s MIFs for consumer credit and deferred debit card transactions, in relation to which no commitments were offered. The Commission has also stated that its investigation against Visa Inc. and Visa International Service Association will remain open pending further assessment, as these undertakings were also addressees of the SO but did not offer commitments. It remains to be seen what impact the General Court’s judgment in the MasterCard case will have on the Commission’s remaining investigations into interchange fees, as well as those being carried out by national authorities.

Source: Commission’s Article 9 commtiments decision, 8 December 2010, available at