The Commerce Commission has settled out of court with Visa in a deal that will change the fees charged on all retail transactions in New Zealand.
Visa has settled – unlike MasterCard, The Warehouse Financial Services in relation to MasterCard, ANZ National Bank, Bank of New Zealand, Westpac, ASB Bank, Kiwibank and TSB Bank – which are due to face the commission in an October High Court case over interchange fees.
Visa may have figured it was on a hiding to nothing when it decided to pay the commission $2.6 million toward its court costs, alongside offering a “pro-active solution” to the commission’s charges that Visa had been breaching the restrictive trade practices provisions of the Commerce Act.
The penalties for price-fixing are up to $10 million a breach, or either three times the commercial gain resulting from the breach, or 10% of a company’s turnover – whichever is higher, which makes Visa's settlement look like small change in comparison.
Visa – and all other major banks and credit card companies in New Zealand – clip the ticket on every card transaction usually to the tune of 1-5% but merchants are prohibited from passing these charges on to customers, so they must average out the cost of that fee across all their sales.
“This increases the cost of every item or service sold by businesses which accept Visa or MasterCard. All customers of those businesses bear that averaged fee, regardless of whether the customer pays by credit card, cash, eftpos or another payment method, the commission notes.
Visa’s settlement with the commission means that merchants will now be able to add surcharges to payments made by credit cards, along with being able to encourage customers to pay by other means.
The banks issuing credit cards will now be able to individually set the interchange rates that will apply to transactions using their credit cards, subject to maximum rates determined by Visa that will be publicly available.
The settlement also means you no longer have to be a bank to issue a credit card: non-bank organisations or companies who want to provide acquiring services to merchants are now allowed to join the Visa network as acquirers – if they meet the relevant criteria.
Commerce Commission chairman Mark Berry believes the changes will improve competition between companies that provide credit card services to retailers in New Zealand over time, saying that, “The commission considers this increased transparency will assist retailers and customers in making decisions about their payment choices.”
The 900,000 New Zealand Mastercards and 2.1 million Visa cards in circulation completed worldwide transactions totalling $19 billion in 2004.
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