Future credit card changes likely to cost consumers more
TORONTO — The Competition Tribunal’s decision on Tuesday to throw out the case against credit card companies was a blow the retail industry, but it’s only a matter of time before Canada goes the way of Australia, the U.S. and much of Europe by permitting merchants to directly pass on the cost of accepting credit cards to consumers.
Bottom line: Competition is coming to the credit card sector.
According to the Competition Bureau, Visa and MasterCard completely dominate in this country, accounting for as much as 90 per cent of the industry.
Given the rising trend toward electronic payment especially credit cards, businesses such as retailers that don’t accept credit cards are at a huge disadvantage. That’s why the vast majority agree to play ball even though the credit card giants require companies that accept their cards to sign agreements that entail significant costs that ultimately get passed on to consumers through higher prices.
The Competition Bureau claims that so-called interchange fees on credit cards in Canada are among the highest in the world. Indeed, they keep creeping higher — one reason the case has found so much support among the merchant community.
The bureau sought to fix the problem by forcing the credit card companies to drop provisions preventing store owners from charging the cost of premium credit cards to holders. It also wanted merchants to be given the right to turn down certain cards if they felt the fees were too high, another no-no for the credit card companies.
Tuesday’s decision means neither of those things are going to happen in the immediate future. But there’s plenty of reason to believe they’ll take place sometime down the road.
First, the federal government has made it a priority to do what it can to boost the prospects of small and medium sized businesses in this country, and even before the bureau launched its case two and a half years ago Finance Minister Jim Flaherty was pressing the financial industry to adopt a more flexible and transparent approach in its dealings with retailers.
In May 2010, the Department of Finance issued a voluntary code of conduct for the credit card industry, requiring among other things that players ensure store owners are made award of the various fees they are required to pay when they accept a credit card and that they are able to provide customer discounts depending on the payment method.
“As job creators and drivers of economic growth, Canada’s small business owners and entrepreneurs — along with consumers — deserve clear information and fair and transparent rules on the type of payment system they use,” Flaherty said. “That is why we developed the Code of Conduct for the Credit and Debit Card Industry in Canada ... I will be carefully reviewing the Competition Tribunal’s decision and also monitoring any potential appeal.”