TORONTO — Canadian shoppers will suffer if a government watchdog strikes down rules that prevent retailers from charging extra fees to use credit cards, Visa Canada said in a legal filing Monday.
The response disputes a recent claim by the federal Competition Bureau that rules made by credit card companies end up costing consumers more, regardless of whether they pay with cash, cheque or cards, because retailers often bury the costs associated with credit card use into the prices of all their products.
In an application filed Dec. 15 with the Competition Tribunal, the Competition Bureau alleged that a “no-surcharge” rule and other policies of both Visa and MasterCard are “restrictive and anti-competitive.”
Store owners are currently charged between 1.5 and three per cent per credit card transaction, but the “no-surcharge” rule prevents them from tacking on a surcharge to offset the extra amount.
Visa said the allegations have no merit and striking down the rules would be harmful to consumers because they actually protect consumers from retailers who could slap fees on transactions and discriminate against card users.
“The Visa rules have not had, do not have and are not likely to have, an adverse effect on competition in a market,” Visa said in the documents.
“These rules are pro-consumer and pro-competitive.”
Visa said the bureau’s allegations mischaracterize the rules “using self-serving terminology” in order to paint them as a violation of the price maintenance section of the Competition Act.
Visa said it doesn’t earn any revenue from interchange fees, which flow to banks and financial institutions that issue the cards to ensure a balance between the two sides of its business.
“Surcharging would result in harm to both cardholders who face the charge (in the form of unexpected higher prices) and to the Visa network and its stakeholders (including merchants) by reducing issuance, acceptance and use of Visa Cards,” it said in the filing.
Visa’s filing with the Competition Tribunal comes on the last day of a 45-day response period after the bureau filed the challenge in December.
MasterCard’s response is not yet available. However, a spokesman at the Competition Bureau said it has received copies of responses from both Visa and MasterCard. Officials are reviewing the responses and plan on filing a reply within 14 days.
“The evidence from other jurisdictions indicates that surcharging has had a positive impact, such as increasing competition between Visa and MasterCard,” the Competition Bureau spokesman said.
“This has resulted in lower credit card fees for merchants and ultimately, lower prices for consumers,” he added.
The bureau also takes issue with credit card policies that allegedly prevent retailers from encouraging consumers to use other payment options like cash or debit, which cost retailers less. But Visa said it has no such policy and does nothing to discourage retailers from offering discounts for using another payment method.
It also opposes a requirement that merchants must accept all credit cards offered by a company, including premium cards that carry higher fees for acceptance.
A $400 purchase on a premium credit card, which includes a three per cent fee, would cost business owners $12 compared with a standard 12-cent flat fee that Interac charges on all debit purchases, regardless of the size.
Retailers have applauded the bureau’s move, saying that those who accept credit cards are punished with higher costs, while consumer groups argue removing the rules would allow individual businesses to impose unfair charges.