The Competition Commission closed its investigation into the credit card market by concluding a settlement with the parties concerned. The settlement provides for a reduction of the average domestic interchange fee for MasterCard and Visa credit cards from 0.95% to 0.44%.
Parties to the investigation were undertakings which issue credit cards (issuers) and those which promote credit card acceptance to merchants and conclude contracts with them (acquirers). All parties entered into a settlement with commission. The settlement provides for a reduction of the domestic interchange fee, which is to be paid by the acquirer to the issuer when a Swiss credit card is used for payment at a Swiss merchant.
In its third decision on the matter, the commission maintained that interchange fees are the result of agreements affecting competition, as they are determined and applied collectively by all relevant undertakings. In past decisions, the commission admitted that multilateral interchange fees can be justified if their level is based on certain network cost elements which also benefit merchants. However, in its latest decision, the commission followed the merchant indifference test. The test was also applied by the European Commission in its recent decisions and forms the theoretical basis for the draft Regulation of the European Parliament and Council on Interchange Fees for Card-Based Payment Transactions (ie, multilateral interchange fee agreements can be justified if fees are reduced to a level at which it makes no difference to merchants whether a payment is made by cash or credit card).
The fee reduction will be implemented in two stages:
- 0.7% from August 1 2015; and
- 0.44% from August 1 2017.
The regime is a maximum average amount and not define a cap. Fluctuations of the maximum interchange fee levels in the regulation will be reflected mutatis mutandis in Switzerland. The commission hopes that it can thereby regulate the matter in a flexible way, taking into account changes in the neighbouring European Union without having to re-open an investigation every couple of years. As foreseen in the draft regulation, non-discrimination rules will be allowed from August 1 2015.
Debit cards were not subject to the proceedings and are not part of the settlement decision.
For further information on this topic please contact Patrick Sommer at CMS von Erlach Poncet Ltd's Zurich office by telephone (+41 44 285 11 11) or email (email@example.com). Alternatively, contact Pascal G Favre at CMS von Erlach Poncet Ltd's Geneva office by telephone (+41 22 311 00 10) or email (firstname.lastname@example.org). The CMS von Erlach Poncet Ltd website can be accessed at www.cms-vep.com.
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