Reasons in Commissioner of Competition v. Visa

On September 9, 2013, the Competition Tribunal issued its Reasons in The Commissioner of Competition v. Visa Canada Corporation and MasterCard International Incorporated, 2013 Comp. Trib. 10. The Tribunal, comprising Phelan J. (presiding), Dr. W. Askanas and Mr. K. Montgomery, unanimously dismissed the Application.

In its Application, the Commissioner of Competition (Commissioner) asserted that each of the Respondents, Visa Canada Corporation (Visa) and MasterCard International Incorporated (MasterCard), had engaged in price maintenance within the meaning of section 76 of the Competition Act, RSC 1985, c. C-34. The Canadian Bankers Association (CBA) and The Toronto-Dominion Bank (TD Bank) were granted leave to intervene in the proceedings. McCarthy Tétrault acted for TD Bank in these proceedings, with a team led by Paul Morrison and comprised of Christine Lonsdale, Jill Yates, Adam Ship, Ron Podolny and Glen MacArthur.

The highly anticipated decision is of importance to several areas of competition law and to the credit card business in general. The decision clarifies the proper interpretation and scope of the resale price maintenance provision, contained in section 76 of the Competition Act. The decision confirms that credit card networks do not engage in resale price maintenance in carrying on their business activities. Importantly, the decision also recognizes the inherent complexity of the Canadian payments system, and the unsuitability of Tribunal intervention in such a multifaceted marketplace.

Background to the Decision

Visa and MasterCard operate electronic payment system networks through which transactions involving, inter alia, credit cards are authorized and paid as between financial institutions. Participants in credit card networks operated by Visa and MasterCard can be broadly divided into those that issue consumers’ credit cards (Issuers) and those that enable merchants to process electronic payments (Acquirers).

Within the Visa and MasterCard networks, Issuers and Acquirers pay Visa or MasterCard a network fee, set as a percentage of each transaction. Acquirers must also pay fees known as "Interchange Fees" to the Issuers. Visa and MasterCard each set the value of Interchange Fees, but do not receive any revenue from these fees, as these are received by the Issuers.

Visa and MasterCard also establish rules to ensure the efficient and secure operation of their networks. Among these rules are the so-called "No Surcharge Rule," the "Honour All Cards Rule" and the "No Discrimination Rule" (collectively, the "Merchant Rules"), which were challenged by the Commissioner. The No Surcharge Rule prohibits merchants which accept Visa or MasterCard credit cards for payment from charging any amount over the advertised price as a condition of credit card acceptance. The Honour All Cards Rule provides that merchants must accept all types of Visa or MasterCard credit cards if they choose to accept any Visa or MasterCard products. The No Discrimination Rule, which is a feature of the MasterCard but not Visa network, prohibits merchants that accept MasterCard credit cards from discriminating against them.

On December 15, 2010, the Commissioner filed an Application alleging that Visa and MasterCard, in requiring their Acquirers to impose the Merchant Rules on Merchants, engaged in resale price maintenance within the meaning of section 76 of the Competition Act. The Commissioner alleged that the Merchant Rules influenced upward or discouraged the reduction of fees paid by merchants for credit card acceptance.

The Decision

Section 76 is engaged where a person influences upward or discourages the reduction of "the price at which the person’s customer or any other person to whom the product comes for resale supplies or offers to supply or advertises a product within Canada." The decision was the first case in which the resale price maintenance provision was interpreted since it was amended in 2009. Before the Tribunal, the Commissioner contended that section 76 did not require that a product or service (in this case, credit card networks’ services) be resold, but only that the person whose prices are being influenced upward or discouraged from being reduced be a "customer." The Tribunal disagreed. Having surveyed the history of the provision, the Tribunal concluded section 76 requires that the product sold by the person influencing upward or discouraging the reduction of the product’s price be resold by the person’s customer. The Tribunal observed that while the resale requirement does not mean the product resold must be "identical" to the product which comes for resale to the customer, it must at the very least be "substantially similar on the important characteristics" to engage the provision.

Applying the above statutory interpretation to the circumstances of the case, the Tribunal found that, as a matter of law, the requirement that a product come for resale to a customer had not been established. In particular, the Tribunal concluded that Acquirers do not resell either Visa or MasterCard services to merchants, but rather provide a different set of services from those provided by Visa and MasterCard to Acquirers. In arriving at this conclusion, the Tribunal endorsed the evidence of Mr. Jeff van Duynhoven, President of TD Merchant Services, the acquiring branch of TD Bank, over that of the Commissioner’s expert. In its reasons, the Tribunal found Mr. van Duynhoven to be an experienced and knowledgeable witness, and his evidence to be "cogent." Mr. van Duynhoven testified that, rather than reselling Visa or MasterCard services to merchants, Acquirers build and operate proprietary networks of their own, deploy proprietary technology and remain financially responsible for the transactions they acquire. The Tribunal also noted that the parties were in agreement that the Acquiring business was very competitive.

The Tribunal then engaged in an alternative analysis, assuming, for the sake of the inquiry only, that the Commissioner had met the resale requirement, or that the Tribunal was wrong in finding that section 76(1)(a)(i) required resale. On this alternative analysis, the Tribunal found that the No Surcharge Rule met the remaining elements of section 76.

The Tribunal members were unanimous in finding that even if the Commissioner had made out her case, they would have exercised their discretion in order to decline to issue the order sought by the Commissioner. The Tribunal found that the case before it was an "exceptional" one. An order pursuant to section 76 would be "a blunt instrument" which would lead to "technical hitches, unforeseen consequences, a need for ongoing adjustment and stakeholder consultation." The Tribunal noted that the order sought by the Commissioner would apply to a broad sector of the Canadian economy – the "merchant sector" – which is not uniformly competitive. To the extent that some markets within the "merchant sector" are left imperfectly competitive, the order risked replacing "one set of distorted incentives by another."

The Tribunal further observed that it could not engage in ongoing monitoring or enforcement of any order it would issue. It thus could not ensure the effectiveness of the remedy sought or institute the necessary safeguards. Because a change in one part of the electronic payments system is likely to have consequences in other parts of the system, the Tribunal was "uncertain that the supposed ‘cure’ will not be worse than the ‘disease.’" In reaching its conclusion, the Tribunal took account of evidence provided, among others, by Mr. van Duynhoven, as well as by Mr. Balaji Bairam, TD Bank’s expert witness, both of whom described the complex and inter-connected nature of electronic payments systems, including credit card networks, and the negative impacts the "but for" world resulting from the order sought by the Commissioner would have.

The Tribunal also noted that the Code of Conduct for the Credit and Debit Card Industry (Code of Conduct) was released by the Minister of Finance and adopted by the payment card networks, Issuers and Acquirers in April 2010. The Tribunal noted that "the extent to which this Code of Conduct may be classified as ‘voluntary’ is very much in doubt," as at the time of its adoption, the credit card industry faced the choice between the Code and even more stringent regulation.1 The Tribunal further observed that "[t]he Code has all the hallmarks of a regulation."

In summary, the Tribunal held that even had the Commissioner satisfied the resale requirement of section 76, or had the Tribunal been wrong in this interpretation of section 76, the Tribunal would nevertheless have refused to exercise its discretion to issue an order sought by the Commissioner.


The decision represents an important development in Canadian competition law. It represents the first case brought under the amended section 76, which has clarified the scope of the resale price maintenance provision. In particular, the decision unequivocally holds that to fall within the scope of this section, a respondent must sell the same or a substantially similar product as the product sold by a downstream reseller. Influencing the price at which a person sells a different product does not engage this section. This interpretation of the resale price maintenance rule accords with its statutory purpose and its economic rationale.

The decision also recognizes the inherent complexity of the Canadian payments system, of which the credit card industry represents an increasingly important part. It recognizes the multifaceted nature of this industry and the broad effect it has on the Canadian economy which defies simple solutions. The large number of stakeholders, and the unpredictable adverse effects a change in one part of the system may have on another part, preclude the regulation of competition within the credit card industry by judicial fiat.

1 Although the Tribunal did not discuss the implication of this observation, if the Code was not in fact voluntary, it could be relied on by the Respondents to assert the common law "regulated conduct defence," which provided that persons whose conduct had been authorized by a regulator could not be found liable of contravening the Competition Act. See, generally, Janet Bolton and Lorne Salzman, "The Regulated Conduct Doctrine and the Competition Bureau’s 2006 Technical Bulletin: Retrospective and Prospective," online: < >. The common law doctrine has been partially codified in section 45(7) of the Competition Act.