Card Notes
MONEY TRANSFERS
More spin from DG Competition’s ‘spokesman’
Following rejection by the European Court of First Instance of Groupement des Cartes Bancaires’ legal action to annul the European Commission’s investigation into its practices (ECR, Sept/Oct p4), DG Competition has addressed a decision to GCB stating that it infringed the EC Treaty’s Article 81, which prohibits anti-competitive behaviour.
As previously reported, GCB adopted measures whose effect was to force new entrants to the French card market – like Egg, Carrefour and Auchan – to pay additional fees of up to e23 per card per year. The big banks which control GCB said these fees were necessary to combat ‘free-riding’ on investments which they had made, and to encourage new competitors of the major banks to acquire merchants and install ATMs.
But the EC carried out ‘dawn raids’ in 2003 which found an alleged smoking gun in the form of a secret agreement to restrict the ability of the new entrants to offer cards more cheaply than the incumbents. Though GCB says it will appeal against the latest ruling, the EC seems to have proved its case.
As noted at the time (ECR, July/August 2005, p5) and mentioned in the official DG Competition FAQs accompanying the latest decision, HSBC subsidiary and GCB board member Crédit Commercial de France did not participate in the anti-competitive decision taken by the GCB board. Whether this was because the other board members did not regard it as sufficiently French to share in the spoils, or because CCF spotted the measures for what they were, has never been revealed.
In announcing the GCB decision, competition commissioner Neelie Kroes added: “This decision underlines the fact that, to ensure the greatest possible benefit to consumers, the single euro payments area must be an area of competition. The Commission cannot tolerate behaviour that goes against the objectives of SEPA by seeking to partition a national market.”
Though GCB’s bad behaviour took place before SEPA had even been thought of, Kroes appears to think the French are still working off a master plan to keep intruders out of their domain.
On October 18, under the heading ‘French banks warned not to block Europe-wide card market,’ the Financial Times reported the GCB decision and added: “The ruling had implications for MasterCard, the credit card issuer (sic), Ms Kroes’s spokesman said. The Commission is expected to rule on whether it has abused its position to overcharge retailers for fees before the end of the year.”
It would be cruel to dwell too harshly on the multiple errors in the FT report, because the point is – what has GCB’s anti-competitive behaviour got to do with MasterCard?
The EC decision on GCB makes only a single reference to the card associations and adds, crucially, that “Visa and MasterCard cards issued in France operate within this system as ‘CB’ cards.”
So what we have here is another case of the Brussels spin machine at work. Presumably Kroes and her spokesman (codename – ‘Neelie’?) are perfectly well aware that MasterCard and Visa are innocent parties in the GCB matter. But why pass up an opportunity to take a swipe at them, particularly when dealing with reporters as gullible as the FT’s?
ECR has documented Kroes’s shameless and inappropriate conduct on payment card issues in the past (July/August 2006, p4) and since then nothing has changed.
But the extremely sharp-suited legal gentlemen who work for MasterCard may look at the facts and conclude that Kroes and her spokesman are displaying what lawyers call ‘animus’ against their client. That will no doubt strengthen their hand when they respond to the EC’s forthcoming ruling on MasterCard’s “abuse of retailers,” as the FT so sublimely puts it.
The spin, if not the substance, of DG Competition’s comments suggest that it has already found MasterCard guilty of abuse and now needs just a little more time to consider the size of the fine.
Visa Europe president Peter Ayliffe has distinguished Visa’s approach from that of MasterCard in dealing with DG Competition: “We think improvement on these issues is best achieved by collaboration, not by a ‘we’ll see you in court’ attitude” (ECR, May/June, p5)
While it may be too early to judge which approach will ultimately succeed, Visa Europe will, in fact, now be seeing DG Competition in court. The EC ruled early in October that Visa Europe infringed competition law between March 2000 and September 2006 in excluding Morgan Stanley from membership. The ruling, under Article 81 like GCB’s, was accompanied with a fine of €10.2 million.
In a statement, Ayliffe noted: “We will appeal this decision. We do not believe that Visa Europe infringed EU competition law. There is no value as a precedent to this decision. The Commission continued to pursue this case even after Morgan Stanley Dean Witter had withdrawn their complaint and the matter was settled between the parties.”
The EC, Ayliffe added, “has stated that the priorities of
enforcement policy should be to concentrate on the investigation
of competition issues that are critical to the European economy.
The Commission has been pondering the future of interchange for
over a decade but has yet to provide the certainty desperately
needed to allow Europe’s banks to invest in developing a
true internal market in payments.” 
