Anti-competitive Conduct: Visa Worldwide Fined Following ACCC Action
Wednesday 9 September 2015 @ 10.57 a.m. | Corporate & Regulatory | Trade & Commerce
On 4 September 2015, the Australian Competition and Consumer Commission (the ACCC) issued a Media Release indicating that international credit card company Visa Worldwide Pte Ltd (Visa) has been fined $18 million by the Federal Court of Australia for engaging in anti-competitive behaviour. The imposition of the said fine brings to an end a case that the ACCC had instituted in 2013 and has been pursuing since that time.
Background and Issues
The ACCC commenced proceedings in the Federal Court against Visa and a number of related Visa entities, alleging contraventions of the Competition and Consumer Act 2010 (Cth) (the CAC Act), specifically sections 46 and 47, in relation to "dynamic currency conversion" services (DCC). Section 46 deals with "misuse of market power" while section 47 relates to "exclusive dealing" and in its action the ACCC alleged that Visa as the operator of the reputedly the "world's largest retail electronic payments processing network", misused its market power for the purposes of:
- preventing the expansion of DCC to new merchant outlets in Australia, such as retail stores; and
- preventing businesses in Australia from supplying DCC services on ATMs in competition with Visa’s own currency conversion service.
The ACCC alleged that Visa earned less revenue when a cardholder selected DCC than when a cardholder used Visa’s own currency conversion service and as indicated at the time by ACCC Chairman Rod Sims, the ACCC was:
“. . . concerned that Visa sought to stop the growth of competing dynamic currency conversion [DCC] services and, as a result, limit the choices available to consumers, . . .”.
It was alleged in the proceedings bought by the ACCC that from May 2010 to October 2010, Visa implemented and maintained rules which prohibited the further expansion of the supply of DCC services on point of sale (POS) transactions on the Visa network by its rival suppliers of currency conversion services in many parts of the world, including in Australia. This ban it was argued by the ACCC meant that merchants that were not already offering DCC to their customers as at 30 April 2010 could not choose to offer DCC. The effect of this action was to freeze the pool of merchants who could offer DCC services during the period in which the ban was in force.
The ACCC also alleged that from at least October 2007 to February 3013, Visa had banned the use of DCC on transactions at ATMs using Visa cards in Australia and further, that Visa had engaged in exclusive dealing, by supplying access to its payment network to Australian banks and in turn, retailers, on condition that they didn’t acquire DCC services from DCC suppliers.
The ACCC at the time indicated that the alleged conduct by Visa gave rise to three key concerns:
- That travelers to Australia using a Visa payment card did not get to choose who did their currency conversion when withdrawing cash from an ATM and, in particular, that they are denied the ability to know the cost of transactions in their own currency at the time the transaction is made;
- That Australian retailers were denied the opportunity to share in the revenue from processing DCC transactions at new merchant outlets; and
- That Australian suppliers of DCC services were, and continued to be, denied the opportunity to compete with Visa in relation to DCC services at ATMs.
The Decision
Website Business First reports that in reaching the decision to fine Visa, Justice Michael Wigney added $2 million in costs to the penalty saying:
". . . it sent a signal to multinationals the world over that Australia was not going to put up with anything that blocked competition in the local market . . . Companies that are responsible for the Australian operation of multinational groups must be deterred from putting into effect and enforcing global decisions made outside Australia where the decisions adversely affect competition or are likely to adversely affect competition in Australia, . . .”.
In the proceedings, Visa admitted that it had brought in rules prohibiting Australian merchants from using any currency conversion system other than Visa’s in 2010, a breach of section 47 of the CAC Act. It did not, as the ACCC indicated in its media release, an admit to a breach of section 46 of the CAC Act, there was with respect to section 46 a decision not to "further press allegations" explained as follows:
"The ACCC has seen media reports speculating that this matter was resolved on the basis that Visa admitted a contravention of section 46 [misuse of market power] of the CAC Act. This was not the case. The ACCC has an obligation to resolve proceedings wherever appropriate and practicable, and given Visa’s admission in this case of a serious contravention of section 47 [exclusive dealing] the ACCC did not further press allegations in relation to section 46. One reason for this is the significant legal hurdle and complexity presented by proceedings under section 46 of the CAC Act."
The ACCC's Comments on the Case
In its media release, ACCC chairman Rod Sims is reported as saying that unlawful conduct preventing or hindering competition in a restricted market was a high priority for the ACCC. In this case, the ACCC's concern being:
“. . . that Visa’s conduct was likely to stop the growth of currency conversion services which competed with its own and, as a result, limit the choices available to consumers, . . .”
Reflecting on the size of and impact of the penalty imposed, the ACCC through its Chairman, indicated that:
“The substantial penalty imposed against Visa Worldwide reflects the serious nature of the conduct, which hindered the competitive process and restricted an emerging technology and service from developing under otherwise competitive market conditions.”
Interestingly, SmartCompany in reporting on the case quotes Melissa Monks, a special counsel at King & Wood Mallesons, as indicating the case may become a valuable precedent, saying:
“This [case] is the first action of its kind against Visa around the world and could very well prompt action by global regulators and possible class actions for civil damages, . . .”
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