EU Accepts Visa Europe's Offer to Cap Its Inter-Bank Fees--Update

By Vanessa Mock 

BRUSSELS--European Union regulators Wednesday accepted an offer from Visa Europe to cap its interbank fees at the same level as MasterCard Inc. to settle an antitrust probe.

Europe's largest card payments company will cut the fees it charges retailers to 0.3% of the value of each transaction, a reduction of between 40% and 60%, the European Commission said. Rival MasterCard agreed to cap fees at that same level in 2009.

Visa Europe made the offer last year to cut the so-called multilateral interchange fees (MIFs), which are paid by retailers' banks to cardholders' banks and are fixed jointly by the retailers' banks.

The deal will also create a level playing field across the continent by obliging all banks to set the same, capped Visa rates to merchants, including for those based in another EU country.

Until now, merchants with high MIFs in their home country didn't benefit from lower rates in another country, leading to wide discrepancies of charges. The owner of a midsize business in Cyprus with a EUR100,000 daily turnover and a third of sales paid for with a Visa debit card, would currently pay EUR130,000 more a year than he would in Finland, where the MIF levels are far lower, the commission said.

The commitments "are excellent news for European consumers, since the fees paid by retailers end up on their bills," said the EU's antitrust chief, Joaquín Almunia.

Visa Europe is owned and operated by more than 3,000 European financial institutions and enjoys a 40% market share in the credit and debit card market in Europe. More than five million merchants accept its cards.

As part of its agreement with the commission, the firm agreed to reduce interbank fees for cross-border transactions to 0.3% for credit and 0.2% for debit transactions. It will also simplify its interbank fee structure and make the invoicing of card acceptance services more transparent to merchants.

Visa Europe said in a statement that the agreement would provide "legal certainty" and would "focus on developing and providing payment solutions for the benefit of consumers, rather than pursuing lengthy legal cases."

The commitments are legally binding on Visa for four years and come nearly five years after the EU's antitrust watchdog filed a formal complaint against the company.

The Commission said it is continuing proceedings against Visa Inc. in relation to its international interbank fees, which are fees that apply when a card holder from outside the Visa Europe territory, such as the U.S., uses a Visa credit card to make a purchase in Europe.

Despite sharing a brand name, Visa Inc. and Visa Europe are separate entities that run their own clearance systems. Visa Europe is owned and governed by its European financial institutions and is a licensee of New York-listed Visa Inc., which receives royalties from the European firm. Visa Europe is also a minority stockholder in Visa Inc.

MasterCard was told by European regulators to cap its fees in 2007 on the grounds that they were too high and flouted competition rules. MasterCard subsequently challenged that decision, which was upheld by the EU's General Court, the bloc's second highest court, in 2012.

Marcin Sobczyk, Andrew R. Johnson and Dana Cimilluca contributed to this article.

Write to Vanessa Mock at [e-mail]

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