Competition Bureau takes on Visa, MasterCard

The Competition Bureau is challenging Canada's largest credit card companies over what the agency is calling anti-competitive rules.

Consumer watchdog challenges credit card rules, merchant fees

The Competition Bureau is challenging Canada's largest credit card companies over what the agency claims are anti-competitive rules.

Canada's largest credit card companies are facing a challenge from the Competition Bureau over fees they charge to merchants. ((Mark Lennihan/Associated Press))
At issue are fees charged to merchants by Visa and MasterCard every time a transaction is processed. The credit card companies collect between one and a half and three per cent of the total amount of the transaction. The companies can charge even higher fees on premium credit cards.

According to Canada's competition commissioner, the rules have eliminated competition between the rivals and driven up the cost to merchants, which ultimately affects the prices consumers pay.

"Visa and MasterCard's anti-competitive behaviour hurts businesses and consumers alike," said Competition Commissioner Melanie Aitken.

'Visa and MasterCard's anti-competitive behaviour hurts businesses and consumers alike.'—Melanie Aitken, competition commissioner

"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," she said.

According to the Competition Bureau, merchants pay $5 billion annually in hidden credit card fees.

Competition Commissioner Melanie Aitken says the anti-competitive behaviour of Visa and MasterCard is hurting consumers. ((Competition Bureau))
The bureau has filed an application with the Competition Tribunal, a quasi-judicial body, to strike down the rules credit card companies impose on merchants that accept their cards.

Among the rules the bureau is concerned with is a prohibition on merchants from encouraging lower-cost forms of payment, such as debit and cash. Under the current agreement, merchants cannot offer lower prices for non-credit card transactions.

Another rule the Competition Bureau wants struck down is one requiring merchants accepting MasterCard or Visa to accept all credit cards offered by that company, even ones that impose more significant costs on the merchant, such as premium cards.

According to the bureau, Canada's credit card fees are among the highest in the world. Canadian merchants pay nearly twice as much as their counterparts in Europe, Australia and New Zealand.

For example, a merchant paying a three per cent fee would give the credit card provider $12 on a $400 purchase. If the consumer were to pay with a debit card, the fee would be 12 cents. With cash, there would be no fee at all.

The bureau began a formal investigation in April 2009. Its challenge is under the price maintenance provisions of the Competition Act.

The Competition Bureau is an independent law enforcement agency that polices the Canadian marketplace.