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Archived — Competition Bureau challenges Visa and MasterCard’s anti-competitive rules

OTTAWA, December 15, 2010 — The Competition Bureau announced today that it has filed 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.

The Commissioner of Competition alleges that these rules have effectively eliminated competition between Visa and MasterCard for merchants' acceptance of their credit cards, resulting in increased costs to businesses and, ultimately, consumers. Merchants in Canada pay an estimated $5 billion annually in hidden credit card fees.

The anti‑competitive restraints on merchants result in higher prices for all consumers, whether they pay by cash, cheque, debit or credit, because merchants pass along some or all of the high costs they are forced to pay as a result of Visa's and MasterCard's anti‑competitive rules.

"Visa and MasterCard's anti‑competitive behaviour hurts businesses and consumers alike," said Melanie Aitken, Commissioner of Competition. "It is particularly harmful for small and medium sized businesses, key engines for economic growth in Canada. Without changes to the rules, merchants will continue to face high costs for credit card acceptance, while consumers, even those who use lower-cost methods of payment like debit or cash, will continue to pay higher prices."

Visa and MasterCard operate the two largest credit card networks in Canada. Together they processed more than 90 percent of all credit card transactions by Canadian consumers in 2009, representing over $240 billion in purchases.

The rules challenged by the Bureau prohibit merchants from encouraging consumers to consider lower cost payment options like cash or debit, and prohibit merchants from applying a surcharge to a purchase on a high cost card. Further, once a merchant agrees to accept one of Visa or MasterCard's credit cards, that merchant must accept all credit cards offered by that company, including cards that impose significant costs on merchants, such as premium cards.

Canada has among the highest credit card fees in the world. Many countries have taken steps to reduce the fees paid by merchants. Canadian merchants that accept Visa and MasterCard credit cards must pay a fee ranging between 1.5 and 3 percent or more of each purchase, nearly twice as much as their counterparts pay in Europe, New Zealand and Australia, but slightly less than in the United States. By contrast, the card acceptance and processing fee paid by merchants in the case of an Interac debit transaction is a flat fee of approximately 12 cents, regardless of the value of the purchase. To provide a practical example, a 3 percent hidden credit card fee on a $400 set of snow tires is $12, but if a debit card is used for the same purchase, the fee is 12 cents.

The Bureau is challenging Visa and MasterCard's rules under the price maintenance provisions of the Competition Act. The Bureau launched its investigation in response to complaints by merchants and their associations and initiated a formal inquiry in April 2009.

For more information, please see the Fact Sheet.

A copy of the Bureau's application will be available shortly on the Competition Tribunal Web site.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

For media enquiries, please contact:
Media Relations
Tel.: 819-994-5945

For general enquiries, please contact:
Information Centre
Competition Bureau
Telephone: 819-997-4282
Toll free: 1-800-348-5358
TTY (hearing impaired): 1‑866‑694‑8389

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