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The European Commission has fined Visa €10,200,000 for a serious infringement of the EC Treaty and EEA Agreement rules on restrictive business practices (Article 81 of the EC Treaty and Article 53 of the EEA Agreement). From March 2000 to September 2006, Visa refused to admit Morgan Stanley as a member without an objective justification.
The Commission found that the exclusion of Morgan Stanley from Visa membership restricted competition in the provision of credit card acceptance services to merchants in the United Kingdom. Morgan Stanley had concrete plans and expertise to contribute to more efficient competition and generate positive effects on prices and the quality of service in a highly concentrated market.
Competition Commissioner Neelie Kroes said: "The payment cards industry plays a key role in the creation and functioning of the single market for payments. The Commission will not tolerate anticompetitive behaviour and will intervene if companies are illegally refused membership of payment card networks".
The Commission opened an investigation following a complaint submitted by Morgan Stanley in 2000. In 1999, Morgan Stanley incorporated Morgan Stanley Bank in the UK and in 2000 Morgan Stanley Bank sought to become a member of the Visa organisation, which Visa refused.
At the time of the infringement, the Morgan Stanley group owned the Discover card network in the US. However, Discover was not present on the EU market. Until Visa finally admitted Morgan Stanley Bank as a member in September 2006, the card operations of Morgan Stanley in the EU were confined to issuing MasterCard cards in the UK. The Commission's investigation revealed that retailers expect banks to offer card acceptance contracts as a package including both Visa and MasterCard. Therefore, Visa’s refusal to admit Morgan Stanley as a member not only prevented Morgan Stanley from providing services to merchants as regards Visa transactions (which represent about 60% of the market), but also as regards other payment cards transactions.
In the UK, the market for providing merchants with card acceptance capabilities (the so-called "acquiring" market) is highly concentrated and there is scope for further competition. Within the very narrow circle of possible entrants, Morgan Stanley is one of the few operators to actually have envisaged entry onto the UK acquiring market. Morgan Stanley had the necessary qualifications to operate efficiently on the market. Consequently, Morgan Stanley’s entry into the UK acquiring market could be reasonably expected to contribute to more efficient competition in the UK and have a positive effect on prices and the quality of acquiring services.
As a reason to prevent Morgan Stanley's membership, Visa invoked an internal rule according to which Visa would not accept as a member any applicant which is deemed by the board of directors to be a competitor. However, the Commission's investigation showed that Morgan Stanley was not a competitor of Visa in the EU because it had no payment card network and - given the high entry barriers to the networks market - there was no realistic possibility that Discover, Morgan Stanley’s US card network, would expand to the EU. Furthermore, the rule was applied in a discriminatory manner, as Visa admitted Citigroup (the owner of the Diners Club network) and several shareholders of JCB Co. Ltd. (the owner of the JCB network) as Visa members.
In August 2004 the Commission sent Visa a Statement of Objections, setting out the findings of its investigation. Subsequently, Visa concluded a settlement agreement with Morgan Stanley in September 2006 and admitted the latter as a Visa member. As a consequence, Morgan Stanley withdrew its complaint with the Commission.
Although the complaint was withdrawn and the infringement ceased, the Commission decided to impose a fine as Morgan Stanley was excluded from the UK acquiring market for six and a half years – including more than 2 years after the Commission had sent a Statement of Objections to Visa.
Visa Europe President and Chief Executive Peter Ayliffe insisted: “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 Commission itself 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.
“Visa Europe believes that if the Commission is truly committed to competition in European payments it would be better prioritising its resources on the unresolved interchange issue which threatens to curtail the growth of electronic payments to the detriment of all of Europe’s businesses and consumers.
“Visa Europe – the only truly European payment system – is committed to the goals of the Commission to create a true internal market for payments in Europe and the establishment of the Single Euro Payment Area. In September we reinforced this commitment to the Commission’s ideals when our banks voted not to join the global merger of Visa regions but instead to continue to operate as a bank membership association focused solely on providing Europe with an appropriate payments system for the 21st century.
“Visa Europe and the Commission need to maintain focus on realising the laudable goals of delivering SEPA, the Payment Services Directive, and the internal market in payments, rather than the Commission pursuing investigations on matters already resolved.
