Thursday, April 3, 2008

CEO of VISA Wants Quick Settlement With EU

-- Visa Europe Ltd. president and chief executive Peter Ayliffe said he wants a 'negotiated settlement' with the European Commission over its cross-border interchange fees, adding that the payments card group seeks an agreement as soon as possible. Speaking to reporters here, Ayliffe said a settlement is the 'right way forward'. He added that the commission is keen to continue the talks and reach an agreement. Ayliffe said while the group is under no 'time pressure' to reach an accord and no strict timetable has been set, it would like to reach a deal as soon as possible. 'The earlier it happens, the better for everybody,' he said. Ayliffe said Visa is looking for closure to the EU's interchange fees case in order to provide certainty going forward in Europe's single market for payments. Ayliffe also said the group's current level of interchange -- set for retailers at an average of 0.7 percent of transactions for processing credit and debit card payments outside the cardholder's country -- is 'justified' in terms of costs and benefits to both retailers and consumers, including advances in technology and security. Big retailers like Ikea, Tesco and France's Carrefour complain that the fees are too high, raising their costs and increasing prices for consumers. He said the group is 'pulling the evidence together' for further talks to justify the fees. Ayliffe added that a common view is emerging that interchange fees -- charges levied on purchases at a retail outlet when the payment is processed -- made on payment card transactions are 'not illegal'. The group said there is 'recognition of interchange's role in payment systems' and that there are 'economic and technical justifications' for the fees' role in the industry.
To this end, Ayliffe said the group was heartened by recent comments made by EU competition commissioner Neelie Kroes and internal market commissioner Charlie McCreevy. Since the start of the year, Kroes has said that not all interchange fees are unlawful, while McCreevy has commented that charges to cover costs of payment networks are 'inevitable'. The CEO said that while some national regulators have brought legal cases against the group over interchange, the 'mature' thing to do would be for them to wait for the conclusion of the commission's investigation.
'There are...national regulators that have put up cases against us. While we are negotiating with the commission, they should put those on hold'. At the end of March, the EU executive opened an in-depth inquiry into Visa's multilateral interchange fees (MIFs) to assess their compatibility with EU laws. The opening of formal antitrust proceedings covers MIFs for cross-border point of sale transactions within the European Economic Area (EEA) using Visa-branded consumer payment cards. The inquiry also covers transactions under Visa's 'honour-all-cards-rule', which obliges merchants to accept all valid Visa-branded cards, irrespective of the identity of the issuer, the nature of the transaction and the type of card being issued, the commission said. Ayliffe said Wednesday that he does not want to see changes to the rule. The commission said it will investigate whether the fees are compatible with EU laws on restrictive business practices such as price-fixing. The commission adopted an exemption decision on Visa's multilateral interchange fee in 2002 after Visa 'offered substantial reforms'. The exemption expired on Dec 31 last year. Visa Europe is part of the global Visa network. It is an association of 4,600 European banks and financial institutions which pay the group fees for use of its services. In October last year, it became independent of Visa Inc. (NYSE:V) In mid-December last year, the commission ruled rival MasterCard Inc.'s (NYSE:MA) interchange fee payments network within the EEA was illegal. Ayliffe said there is a difference between the cases put forward to the commission by the group and that of MasterCard, based on legal arguments used. He also said each case must be judged 'on its own merits'. The commission concluded the group's MIFs inflated the cost of card acceptance by retailers without leading to proven efficiencies. MasterCard then had six months to comply with the order to withdraw the fees. If MasterCard fails to comply, the commission said it may impose daily penalty payments of 3.5 percent of the company's daily global turnover in the preceding business year. MasterCard has appealed against the decision to the EU courts in Luxembourg. The EU executive said at the time of its decision MIFs are not illegal as such but stressed they are only compatible with EU competition rules if they contribute to technical and economic progress and benefit consumers. The EU executive says the overall payment cards sector handles payments worth 1,350 billion euros a year. Visa said 80 percent of payments made in the 27 member state bloc were made in cash, but added that this is likely to decrease over time in favour of payment cards. The group claims that more than 1 euro in every 9 in Europe is spent on a Visa card. It aims to increase this to 1 euro in every 5 by 2015.

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