On 3 October 2007 the Commission found that the exclusion of Morgan Stanley from Visa membership was a serious infringement of Article 81. The exclusion had resulted in restricted competition in the provision of credit card acceptance services to merchants in the United Kingdom, and Visa was subsequently fined 10.2 million euros.
In 1999, Morgan Stanley incorporated Morgan Stanley Bank in the UK and in 2000 Morgan Stanley Bank sought to become a member of the Visa organisation, which Visa refused. The refusal was based on an internal rule, which allows Visa to refuse membership to competitors. At the time of the infringement, the Morgan Stanley group owned the Discover network in the US. However, Discover was not present on the EU market and there were no realistic possibilities that Discover would expand to the EEA in the near future due to the following:
- There are very high barriers to entry into the card networks market in the EEA, unless entry occurs on a very large scale and heavy investment is made it is very difficult to introduce a successful system;
- Discover was launched in the USA with the cooperation of the USA's largest retailer Sears, but in Europe Morgan Stanley has no equivalent to Sears to launch Discover; and
- Discover is a relatively small proprietary card system with nearly no international card acceptance.
The Commission's investigation also revealed that retailers expect banks to offer card acceptance contracts as a package including both Visa and MasterCard. Therefore, Visa's refusal to admit Morgan Stanley as a member, prevented them from providing services to merchants as regards Visa transactions (which represent about 60% of the market) but also as regards other payment cards transactions.
In the UK, the market for providing merchants with card acceptance capabilities is highly concentrated and there is scope for further competition. Morgan Stanley had the necessary qualifications to operate efficiently on the market, consequently Morgan Stanley's entry could reasonably be expected to contribute to more efficient competition and have a positive effect on prices.
In August 2004 the Commission sent Visa a Statement of Objections, setting out the findings of its investigation. Subsequently Visa concluded a settlement agreement with Morgan Stanley and Morgan Stanley was admitted as a member on 22 September 2006.
Although Morgan Stanley had withdrawn its complaint the Commission decided to impose a fine as Morgan Stanley was excluded from the UK acquiring market for six and a half years and because it is important for the proper functioning of the Single Market for payments, that anti-competitive practices are not tolerated.
Visa have indicated that they are going to appeal this decision, claiming that if the Commission was truly committed to competition in European payments it would prioritise its resources on the unresolved interchange issues.
The fact that the Commission are trying to inject more competition into this sector is a positive sign for consumers. Merchant acquiring is an economically significant activity that remains compartmentalised along national borders and is characterised by weak competition, new entrants in the acquiring market are scarce, and therefore this decision should have a beneficial effect on the markets.