Interchanges: Visa’s Legal Problems in EU

• After the European Court of Justice dismissed MasterCard's appeal last spring, Visa, in its turn, has to face legal problems in Europe.

• The EU Commission has officially warned Visa Europe of its preliminary view on its Multilateral Interchange Fees (MIF) on credit card transactions. A partial compromise has been reached end 2010 on debit cards, the only remaining issue is the default interchanges on customer credit cards. According to the Commission’s DG Competition, these interchanges actually "harm competition” and it doubts that they would benefit final merchants or consumers.

• This supplementary statement only leaves Visa Europe with one option: make a written reply or ask for a hearing on the issue which could see fines imposed of up to 10% of turnover imposed for antitrust breaches.

Source: Finextra

• As the European Union is becoming less and less accommodating, and as today’s regulatory and economic context in the US domestic market are hardly even profitable, a decrease in European issuing profitability is being confirmed. In the beginning of the years 2000, Visa took advantage of a temporary exemption from European competition rules. Since 2006, this exemption has been replaced by investigations, followed by compulsory negotiations to avoid pending penalties. Also the PSD and regulators’ decisions have increased pressure and even pushed the pan-European project Monnet to drop its plans.

• In the US, MasterCard and Visa are facing difficult times. Large-scale retailers filled complaints and the card schemes recently had to deal directly with them. A 7.25 billion dollars (5.85 billion euros) class action settlement has been reached over credit card interchange. This amount, way higher than the cumulated 3 billion dollars already accepted over the past ten years in the US, however disappoints most retailers and Walmart, voicing his rejection, has just stepped off the settlement.