The federal finance minister is stepping into a fee dispute between Canada’s merchants and the big credit-card companies after the Competition Tribunal sided with Visa and MasterCard in a landmark ruling.
Jim Flaherty said Tuesday that, in light of the ruling, he will convene a special meeting of the government’s FinPay Committee — a consultative body on payments issues that includes representatives from consumer, small business and retail groups, as well as the credit-card industry.
The Competition Bureau had brought a complaint to the tribunal that the credit-card companies exert too much power in forcing merchants to accept credit cards that carry higher processing fees.
Those fees are among the highest in the world, according to the bureau, adding up to between $5 billion and $7 billion annually.
But the tribunal dismissed the case Tuesday, saying its reasons, at least for now, are being kept under wraps.
“The tribunal’s reasons are confidential at this time in order to protect properly confidential evidence,” it said in a statement.
“A public version of the decision will (be) issued as soon as possible after a determination as to what information must remain confidential has been made.”
In a summary of its decision, the tribunal made two findings.
First, it found that Visa and MasterCard did not violate Section 76 of the Competition Act, which would require that merchants resell credit-card products.
However, it also found that restrictions imposed on merchants by Visa and MasterCard, preventing them from applying a surcharge for those customers paying with credit cards, may have had an adverse effect on competition.
Still, the tribunal rejected the complaint on that basis, placing the ball instead in the federal government’s court.
It said the proper solution to concerns raised by the commissioner about anti-competitive behaviour on the part of the credit-card companies is regulatory change.
And it suggested there would be a consumer backlash should merchants be allowed to impose surcharges on customers using cards that carry higher interchange fees.
“In that regard … the experience in other jurisdictions showed that concerns would be raised by consumers regarding surcharging and that sooner than later, intervention would have to take place by way of regulation.”
In response, Flaherty said Canada’s small business owners and consumers “deserve clear information and fair and transparent rules on the type of payment system they use.”
The minister added that while he reviews the tribunal’s decision he will monitor any potential appeal.
The ruling will benefit consumers, who will not have to face additional costs for using credit cards that offer reward points, said MasterCard Canada president Betty Devita.
“The ability to do (transactions) without having to think about whether or not there will be a surcharge or confusion at the checkout is positive for both consumers as well as merchants,” she said.
“And ultimately that means positive for us as well.”
Visa Canada echoed that it considered the Tribunal decision a positive one for consumers.
Small businesses were hoping the case would provide merchants new powers to push back against rapidly rising credit-card processing fees, said the Canadian Federation of Independent Business.
“While the decision is disappointing, CFIB is pleased the Competition Tribunal recognized the adverse effect Visa’s and MasterCard’s policies have had on competition,” said president Dan Kelly, who noted the tribunal’s suggestion of a regulatory solution.
The federation called on the Harper government to add new provisions to the Code of Conduct for the Credit and Debit Card Industry, allowing merchants the choice of charging customers more for using premium cards.
“We are particularly disappointed by the decision as U.S. small firms recently gained the ability to surcharge through an out-of-court settlement with Visa and MasterCard,” said Kelly.
“Given Visa and MasterCard agreed to allow surcharging in the U.S., we expect that Canadian merchants should be allowed the same powers.”
The Competition Bureau said it would review the decision, calling it disappointing but noting that the Tribunal found the conduct of the credit card companies had a negative effect on competition.
NDP consumer critic Glenn Thibeault said he will also review the full ruling once it’s available, and introduce a private member’s bill in the fall calling for a cap on the interchange fees businesses must pay to process credit card transactions.