Brussels, 03/08/2004 (Agence Europe) - The European Commission has announced that it had sent a Statement of Objections to the international Visa banking association, whose rules state that the Visa International Board shall not accept for membership any applicant deemed by the Board to be a competitor of Visa. The Commission considers that the rule is not applied objectively and in a non-discriminatory manner regarding the American bank Morgan Stanley Dean Witter (MSDW).
Further to a complaint filed by the bank, in April 2000, the Commission had opened its preliminary inquiry of Visa and MasterCard practices. The latter is not threatened by such an inquiry as it accepted Morgan Stanley among its members and because its by-laws do not include such a rule. The Commission also takes this as justification for its action and considers that the argument put forward by Visa on the protection of confidential information does not hold water.
Visa considered that MSDW was a competitor as it has its own credit card, the Discover brand credit card, on the American market. By entering the association, the bank would have had access to competitive information, Visa International states. According to the Commission, MSDW does not, however, intend to introduce its preferential payment card on the European market. The bank first of all hopes to develop its activity for traders and retailers by getting them to accept payment by credit card and then by issuing its own Visa cards. Furthermore, Morgan Stanley finds itself in a situation that is comparable to that of Citigroup, which is a member of Visa although operating its own credit card network, the Diners Club. In a press release, the Commission comments that "Visa has failed to explain why a global network such as Diners Club, which operates in over 200 countries including Europe should be less of a threat to Visa than a regional network like Discover, which operates only in the US and does not have any presence in Europe".
The Commission believes that, by refusing a new entrant, competition is limited on one segment of the market and that this does not allow consumers to use this means of payment everywhere because use of the system is still too expensive for traders. Stronger competition would put downward pressure on tariffs fixed by the other banks for traders or retailers for installing a terminal and managing transactions with the customers' banks.
The Commission could impose a fine equivalent to 10% of turnover but the interested parties will first of all have the possibility to make their arguments heard and to benefit from an oral hearing within three months.