Consumer watchdog challenges credit card rules, merchant fees

 

The Competition Bureau is challenging Canada's largest credit card companies over what the agency claims are anti-competitive rules.

At issue are fees charged to merchants by Visa and MasterCard every time a transaction is processed. The credit card companies collect between one and a half and three per cent of the total amount of the transaction. The companies can charge even higher fees on premium credit cards.

According to Canada's competition commissioner, the rules have eliminated competition between the rivals and driven up the cost to merchants, which ultimately affects the prices consumers pay.

"Visa and MasterCard's anti-competitive behaviour hurts businesses and consumers alike," said Melanie Aitken, Canada's competition commissioner.

"Without changes to the rules merchants will continue to face high costs for credit card acceptance while consumers, even those who use lower-cost methods of payment like debit or cash, will continue to pay higher prices," she said.

According to the Competition Bureau, merchants pay $5 billion annually in hidden credit card fees.

The Bureau has filed an application with the Competition Tribunal, a quasi-judicial body, to strike down the rules credit card companies impose on merchants that accept their cards.

Among the rules the Bureau is concerned with is a prohibition on merchants from encouraging lower-cost forms of payment, such as debit and cash. Under the current agreement, merchants can not offer lower costs for non-credit card transactions.

Another rule the Competition Bureau wants struck down is one requiring merchants accepting MasterCard or Visa to accept all credit cards offered by that company, even ones that impose more significant costs on the merchant, such as premium cards.

According to the Competition Bureau, Canada's credit card fees are among the highest in the world. Canadian merchants pay nearly twice as much as their counterparts in Europe, Australia and New Zealand.

For example, a merchant paying a three per cent fee would give the credit card provider $12 on a $400 purchase. If the consumer were to pay with a debit card, the fee would be 12 cents. With cash, there would be no fee at all.

The Competition Bureau began a formal investigation in April 2009. Its challenge is under the price maintenance provisions of the Competition Act.

The Competition Bureau is an independent law enforcement agency that polices the Canadian marketplace.

http://www.cbc.ca/consumer/story/2010/12/15/con-credit-card-fees.html

They'll just find another way to gouge and screw people... it's in their blood.

IMO, if there are to be fees, it should be those using the cards, (ie the cardholders), who pay them 100%.
Instead, those who pay cash are subsidizing those merchant fees.
Furthermore, merchants are denied service by the credit card companies if they pass the fees on to the card users or discount the cash purchases.