Only two weeks after imposing a
€10.2 million ($14.5 million) fine on Visa for restrictive
practices (see “
fines Visa Europe over Morgan Stanley
), the European Commission has once
again decided to remind the European payment card industry that it
is not afraid to take action against card players that it judges to
be engaging in anti-competitive practices. This time, France’s
Cartes Bancaires (CB) is on the receiving end of the EC’s
strong-arm treatment, having been deemed to be in breach of EU
anti-trust rules.

European Commissioner for Competition Neelie Kroes, who has long
incurred the wrath of Visa and MasterCard over her interventionist
stance towards interchange, said: “This decision underlines the
fact that, to ensure the greatest possible benefit to consumers,
the Single Euro Payment 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

EC spokesperson Jonathon Todd said that “it was consumers who paid
the price for this”. He added that this has implication not only
for French consumers but also for European ones.

Alleged price fixing

According to the EC’s ruling, made on 17 October, CB “adopted price
measures which hinder the issuing of cards in France at competitive
rates by certain member banks, thereby keeping the price of payment
cards artificially high to the benefit of the major French banks”.
Although stringent in its judgment against CB, the EC has decided
not to impose a fine on CB, as was the case with its decision
against Visa. Instead, the EC has now ordered CB to abandon the
price measures with immediate effect and to avoid taking any
measures with a similar purpose or effort in the future. CB has
announced that it will appeal the decision.

The key price measure used by CB is the mécanisme régulateur de la
fonction acquéreur, a formula that determines whether a fee of up
to €11 on each card issued should be paid by member banks that are
not sufficiently active in terms of acquisition of merchants or
installation of ATMs. The other measures are a membership fee of
€12 per card, an additional membership fee and a mécanisme de
réveil des dormants (‘sleeping member’) fee of €12 per card issued
in excess of a maximum number of cards stipulated by the CB.

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Some of France’s largest retailers will support the EC’s ruling, as
they seek to expand into financial services provision in direct
competition with the banks. French retail groups have traditionally
viewed CB as nothing more than a price-fixing cartel and resented
being hit with a membership fee that the large French banks did not
have to pay, and the EC’s ruling has concurred with that

Central to this view was a distinction made in the contract
establishing CB between the major banks that are members of its
board of directors and the other members (which include the banking
arms of large retailers such as Carrefour and Auchan, and internet
banks). Only board members can adopt price measures without needing
first to consult or inform the other members or obtain their votes
in support of the measures.

“The commission is keeping its promises to fix the card market
before SEPA: consumers, retailers and thereby the whole European
economy will benefit from it,” commented Xavier Durieu, secretary
general of European retail trade industry body EuroCommerce.
“Having been promised a real single market, consumers are now
entitled to see a solution at European level, and be guaranteed
that SEPA does not bring more problems and costs than

CB hits back

CB responded to the EC’s ruling by saying that the four price
measures under fire mainly related to the mechanism for regulating
the acquiring function, and have never been introduced by CB,
pending a final decision from the EC.

“Groupement des Cartes Bancaires does not agree with either the
legal arguments or the economic analysis on which the European
Commission’s decision is based. Consequently, Groupement des Cartes
Bancaires will consult the members of its executive board in the
near future with regard to a resolution to bring an appeal before
the Court of First Instance in Luxembourg,” CB said.