As expected, Visa and MasterCard came out with guns blazing in their Responses to the Commissioner of Competition’s claim that they had engaged in price maintenance contrary to Canada’s Competition Act. The Commissioner fired back with a 34 page Reply that attempts to answer the arguments made in the Responses. Meanwhile, TD Bank and the Canadian Bankers Association both applied for leave to intervene in support of the Respondents. The Respondents have since supported both leave applications, while the Commissioner has opposed them. The hundreds of pages of material now on the Competition Tribunal’s record serve to highlight the complex issues that must be resolved by the Tribunal.

Recall that, just before Christmas, the Commissioner of Competition filed an application before the Competition Tribunal (click here to read our E-lert where we discussed this Application). The Application alleged that each of Visa and MasterCard impose “Merchant Restrictions” that constitute impermissible price maintenance contrary to section 76 of the Competition Act (these Merchant Restrictions include the following: (i) requirements to honour all cards bearing the network's brand (i.e. the “Honour All Cards Rule”); (ii) prohibitions against surcharging (the “No Surcharge Rule”); and (iii) rules that constrain a merchant from discouraging the use of cards that are more costly for the merchant in favour of less costly cards (the “No Steering Rule”). The Application asks the Tribunal to prohibit the Respondents from enforcing the Merchant Restrictions, and, more generally, to prohibit them from impeding or limiting merchants’ acceptance, use and treatment of alternate payments types.

The key issues in dispute include the following:

  1. Do the price maintenance provisions require a sale/resale?
  2. Are the Merchant Restrictions sufficient to constitute an attempt to influence upward or discourage the reduction of prices?
  3. Even if the Merchant Restrictions satisfy the substantive elements of the price maintenance provisions, do they meet the competitive effects test set out on the statute?
  1. What is the relevant market which the competitive effects must be evaluated?
  2. Do the Market Restrictions cause an adverse lessening or prevention of competition?

Although the Tribunal record is already voluminous, the only certainties at this point is that nothing is clear and that significant time, effort and money will be spent before anything is resolved. Both the Commissioner and the Respondents face considerable challenges in making their cases.

We have prepared a memorandum that analyzes the issues and arguments described above in more detail. Click here if you would like to review it.