MasterCard and VISA vindicated by Competition Tribunal price maintenance decision* 


July 2013

Competition Bulletin

In early 2009 Canada's Competition Act was significantly amended. One of the amendments removed the price maintenance provisions from the criminal provisions of the Act to re-enact them – in largely the same form – as a reviewable conduct provision. As a result, agreements between suppliers and distributors as to minimum prices to be charged by the distributor, as well as refusals by suppliers to provide product to discounting distributors, ceased to be criminal offenses. Rather, the same conduct became subject to civil challenge before the Competition Tribunal. If the applicant can demonstrate that the conduct is having an adverse effect on competition the Tribunal may make an order that the conduct cease.

The first – and so far the only – case which has been brought under this new civil provision is far from the typical supplier/distributor situation described above. The case was brought by the Commissioner of Competition in late 2010 against VISA and MasterCard. However, unlike the traditional price maintenance situation of a supplier setting the price at which its distributor may sell, the Commissioner challenged MasterCard and VISA rules which require (i) that if merchants accept such payment cards they cannot charge cardholders a surcharge for paying with the card (the "No Surcharge" rule); and (ii) requiring that, if merchants accept one type of VISA card or MasterCard card, they must accept all cards within the brand (the "Honour All Cards" rule).

Because of the peculiar facts of this case, the decision provides relatively little guidance to the business community as to the applicability of the new reviewable price maintenance provisions to a more typical price maintenance situation.

Challenges to the Honour All Cards and No Surcharge rules, as well as to the basic system of interchange rates used to balance demand between the consumer and merchant side of the platform, have occurred in various parts of the world. The European Commission is active in the area. In the United States a major class action has recently been settled touching on these issues. In Australia the Reserve Bank has made regulations with respect to the issue. In Canada, as well as the Competition Bureau proceeding before the Tribunal, there are major outstanding class actions addressing some of these same issues.

The full reasons for the decision have not been released by the Tribunal, as it is editing them for confidentiality. Once these reasons are available, there may be additional insights available with respect to the application of the new civil reviewable price maintenance provision. No decision has been announced by the Commissioner as to whether he will appeal the Tribunal's decision to the Federal Court of Appeal, but there is a thirty day appeal period.

* McMillan represented MasterCard in the case before the Competition Tribunal, with a team led by James Musgrove, Jeff Simpson, David Kent and Adam Chisholm.

by James Musgrove, Mark Opashinov and Neil Campbell

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2013