On July 23, 2013, the Competition Tribunal dismissed the Commissioner of Competition’s resale price maintenance (RPM) case against Visa Canada Corporation and MasterCard International Incorporated (CT-2010-010). In a summary of its decision (which will be made available in full once confidential information is identified and redacted), the Tribunal said that section 76 of the Competition Act requires a resale and that, in this case, the Commissioner of Competition had not established that Visa and MasterCard’s customers resell Visa and MasterCard’s products. Furthermore, the Tribunal held that the Commissioner’s proposed interpretation of section 76 of the Act was not supported by the legislative history of the provision or other decisions.
In the event that the Tribunal’s interpretation of section 76 of the Act was incorrect, the Tribunal conducted an alternative analysis that assumed that Visa and MasterCard engaged in RPM, as defined by the Commissioner, by implementing the no-surcharge rule. The no-surcharge rule prohibits merchants from applying a surcharge for customers paying with credit cards. Under these circumstances, the Tribunal found there had been an adverse effect on competition. However, even under this alternative analysis, the Tribunal said that it would not have issued an order and stated that a regulatory, rather than competition, response would be better suited to address the concerns raised by the Commissioner. The Tribunal further noted that the experience in other jurisdictions showed consumer concerns related to surcharging would arise and regulatory intervention would then take place.
As discussed in an earlier post, in December 2010, the Competition Bureau filed an application with the Tribunal against Visa and MasterCard under section 76 of the Act. Section 76 is a civil provision that enables the Tribunal to prohibit anti-competitive resale price maintenance. The Bureau alleged that Visa and MasterCard lessened competition between and among credit card networks by requiring banks to impose restrictive rules on merchants that prevent merchants from encouraging the use of cards with lower transaction fees. The Bureau argued that these rules hurt consumers because merchants recover the higher fees by increasing prices generally, and consumers using low-cost cards or cash effectively subsidize consumers who use high-cost cards. Visa and MasterCard disputed these allegations and argued that the rules were in compliance with the Act and that they help ensure consumer choice is protected at checkout.
In response to the Tribunal’s decision, the Commissioner of Competition, John Pecman, released a statement stating that he was, “disappointed that the Tribunal had dismissed the Bureau’s application,” and indicated that the Bureau will be reviewing the Tribunal’s decision to determine its next steps.