Visa fee system does not violate Competition Act: CCS

SINGAPORE - The Competition Commission of Singapore (CCS) said on Wednesday that it found Visa Worldwide's multilateral interchange fee system (MIF) compliant with the Competition Act here.

Interchange fees are fees paid by the banks that process purchases on behalf of storeto banks which issue credit cards to consumers. The fees are ultimately borne by retailers who have complained they are too high and are not transparent.

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Below is the full press release from CCS:

CCS issues a clearance decision on Visa's MIF system

The Competition Commission of Singapore ("CCS") has cleared the Notification for Decision received from Visa Worldwide regarding its Multilateral Interchange Fee ("MIF") system.

Visa Worldwide sought a decision from CCS as to whether its MIF system would violate the Competition Act, in particular, the Section 34 prohibition against anticompetitive agreements. CCS assessed whether Visa's MIF system (see Annex A) has the effect of preventing, restricting or distorting competition within Singapore.

After extensive consultation with the relevant stakeholders and a careful review of the facts and evidence, CCS finds that the evidence available to it does not suggest that the MIF system has resulted in an appreciable adverse effect on competition in Singapore, in any of the relevant markets considered. Such being the case, CCS has issued a clearance decision on Visa's MIF system.

In assessing the Notification, CCS consulted a wide range of industry participants including merchants, banks, payment processors, and card schemes in Singapore, as well as cardholder surveys.

CCS conducted two surveys of merchants of different sizes and industry categories in Singapore to gather feedback on any concerns regarding card payments, including merchant practices towards card acceptance and their participation in card promotions and incentive programmes in Singapore.

CCS assessed the competitive effects of Visa's MIF system on the market involving bank issuers in Singapore ("issuing market"), the market involving Visa acquirers in Singapore ("acquiring market"), and the market for card scheme administration services in Singapore ("card scheme market").

In making its assessment, CCS compared the present state of competition in each of these markets with the degree of competition that would exist in those markets if the MIF system was not in place.

The difference in competition between the two scenarios provides an indication of whether Visa's MIF system has resulted in an appreciable adverse effect on competition in Singapore.

CCS regards bilaterally negotiated interchange fees only between banks that are both issuers and acquirers in Singapore as the likely outcome to arise in the absence of the MIF system. For all other situations, in the absence of such bilaterally negotiated arrangements, no interchange fees would apply.

In the card scheme and issuing markets, CCS finds that it is unlikely that there would be more competition in these markets without the MIF system.

In the acquiring market, CCS finds that it is not clear that competition would be significantly greater in this market without the MIF system. It is likely that barriers to entry and expansion for small or new acquirers (with no issuing business) in Singapore would be higher.

This is because banks that are both issuers and acquirers are unlikely to have an incentive to reach bilateral agreements with these pure acquirers, and so are unlikely to structure their cardholder reward and rebate programmes for such transactions, which do not generate interchange fees.

On the evidence available to it, CCS concludes that Visa's MIF system has not infringed Section 34 prohibition of the Act.

Assistant Chief Executive of CCS, Mr. Toh Han Li commented, "We have examined the effect of Visa's MIF by analysing the state of competition in the relevant markets in Singapore, with and without the MIF system.

Based on the evidence available to CCS, we assessed that Visa's MIF system has not resulted in appreciable adverse effects on competition in Singapore. However, CCS reserves the right to re-examine the matter if there is a material change in current circumstances."

More details may be found at the CCS website: https://www.ccs.gov.sg/content/ccs/en/Public-Register-and-Consultation/Public-Register/Anticompetitive- Agreements.detail.visa_internationalserviceassociation.html