[By Michael-James Currie]
On 13 August 2019, the Competition Commission of Mauritius (CCM) has, following a lengthy investigation, ordered VISA and MasterCard (Respondents) to reduce their banking interchange fees from 1% to 0,5%.
The CCM found that the Respondents set an interchange fee of 1% which in turn led to higher merchant fees. As a consequence, the interchange fee were found to have hampered the incentive for banks to issue credit/debit cards and to provide card facilities to merchants. This led to either some merchants electing not to have card accepting facilities or to increase the final price to consumers.
The high interchange fees were found by the CCM to impede competition between banks and in particular, the ability of smaller “acquirer” banks to compete with more established banks.
In determining the 0,5% “fee cap”, the CCM noted that the respondents offered a 0,5% interchange fee for payments at petrol stations and that the lower interchange fee applicable to petrol station payments has had positive effects.
The executive director of the CCM, Mr Deshmuk Kowlessur, stated that:
“The decision of the Commission requiring VISA and MasterCard to limit the interchange fees to a maximum of 0.5% is likely to reshape the competition landscape in the local payment card market. The reduction of the interchange fees will open-up the market for existing and potential banking and other financial institutions to offer acquiring services to merchants. At the same time, the two dominant banks will have to compete more rigorously. A new dynamism in the local payment card market is likely to encourage existing competitors and new entrants to offer innovative services. The resulting lower merchant service commission will encourage card-acceptance by merchants and thus offer card users the convenience, security and lower costs of settling their transactions. It can also be expected that consumers can benefit from lower prices of goods and services, as merchants’ cost of transaction will be reduced with lower merchant service commission. At the end, the reduction in the interchange fee will bring more competition in the payment card market and positively impact on trade, commerce and economic development.”
The decision by the CCM is noteworthy for a number of reasons. The CCM’s findings is based on an abuse of dominance case by “setting a high interchange fee”. The CMM’s reasons (at those which are publicly available) do not, however, provide any indication of the benchmark used for finding that the prices were “high”. Unlike traditional excessive pricing cases (which are notoriously difficult to prosecute), the CMM does not set out the requisite test which should be used for purposes of determining whether a price is “high” (or excessive). The media release published by the CCM appears to suggest that the conduct amounted to a “collective dominance” / tacit collusion type of case without expressly stating as much.
John Oxenham, director at Primerio, says that the CCM’s remedy is noteworthy as “the CCM is for all practical purposes acting as a price regulator which is traditionally not the role of competition authorities“.
VISA and MasterCard have, however, indicated that they will appeal the CCM’s findings before the Supreme Court.
[Primerio specializes in providing competition law advice to clients across Africa including Mauritius]