Tribunal rejects credit-card fee change, reasons kept secret

The Competition Tribunal has dismissed a complaint from major Canadian retailers about the way credit card companies charge them for processing transactions.

Canada's Competition Bureau posted the results of a recent tribunal that delved into the fees retailers are charged by credit companies.

Retailers wanted the right to refuse so-called premium cards that charge them more, but under current rules, retailers aren't allowed to pick and choose what versions of any given credit card they accept.

'Canadians are paying more than they should be at the register because of these high fees.' —David Wilkes, Retail Council of Canada

"The tribunal dismissed the application without costs," the bureau said in a statement on its website Tuesday. 

"The reasons are confidential. A public version of the decision [will be released] as soon as possible after a determination as to what information must remain confidential has been made."

Further details may follow when the Tribunal clarifies what portions of its reasoning can be made public, but the tribunal dismissed the complaint on a technicality, arguing that the section of the Competition Act that the board chose to argue its case on does not apply. Section 76 of the Act requires a resale of products, and the board did not establish that retailers are reselling the credit card companies' products, under the legal definition.

The tribunal said, however, that it proceeded to look at the case anyway, disregarding that technicality. "The Tribunal found that even under this alternative analysis, it would have declined to issue an order and noted that the proper solution to the concerns raised by the Commissioner is a regulatory framework," the tribunal said.

Essentially, the tribunal ruled the competition bureau chose the wrong section of the act to fight on, but even if it was applicable, the best way to deal with the issues raised is to change the rules from here on out.

The Retail Council of Canada was quick to agree with that sentiment. "Although disappointed the Tribunal failed to strike down the restrictive and anti-competitive rules RCC agrees the problem is best addressed by regulation," the retailer lobby group said in a statement following the decision.

No fee changes

The bureau had brought the complaint against Visa and MasterCard to the tribunal, arguing the differing fees were among the highest in the world.

Many retailers have asked for the rules to be changed so that they can reject higher-fee cards while still accepting others, or possibly add a surcharge on to customers when they pay, to cover the rising costs.

"Canadians are paying more than they should be at the register because of these high fees," retail council spokesperson David Wilkes said. "Totalling more than $6 billion annually, these fees have a negative effect on merchants and consumers alike."

A $400 purchase on a premium card with a three per cent transaction fee would cost a retailer $12 to process, the retail group says. That's 100 times more than the cost of that same sale on a debit terminal, which charges a flat fee of 12 cents per transaction.

Finance Minister Jim Flaherty acknowledged the move, noting that the government has worked for clarity on the subject of transaction processing fees. "I will be carefully reviewing the Competition Tribunal’s decision and also monitoring any potential appeal," Flaherty said.

"Recognizing the importance of this issue to all involved, I have also asked that a special meeting be convened of the government’s FinPay Committee — a consultative committee on payments issues that includes representatives from the credit card industry, small business, retailers, consumers, and many more — to discuss this matter and next steps."

MasterCard issued a statement lauding the decision.

"The data proves that retailers that accept MasterCard see an increase in sales and reduce their costs of handling cash and record keeping," MasterCard Canada's president Betty K. DeVita said in a statement.

"We are pleased that we will continue to be able to protect consumers from unfair or unexpected fees at checkout."

Visa also welcomed the decision, saying "The decision by the Tribunal to dismiss the Competition Bureau’s case … is a positive for consumers. This decision reinforces that Visa’s rules are compliant with the Canadian Competition Act and helps ensure that consumer choice is protected at checkout."