BACKGROUNDER – POSITION ON MASTERCARD CANADA RULES
MasterCard Canada is committed to delivering choice and value to merchants and consumers.
The MasterCard® payment system has been an important part of the Canadian economy for decades. With innovations like PayPassTM Tap & Go® technology, MasterCard Canada continues to deliver smarter, safer and simpler ways for consumers to pay.
MasterCard Canada Rules
The Competition Bureau has challenged rules established to protect consumers and ensure the efficient operation and balance of the MasterCard payments system. The rules focus on balancing both consumers' desire to use MasterCard cards and merchants' willingness to accept such cards.
Canadian consumers have choices with a growing number of payment options: MasterCard, Visa, American Express, Interac, cheques and cash are all competitive payments options. In addition, PayPal and Discover are both rapidly expanding in Canada.
Canadian merchants are free to encourage consumers to use other forms of payment and even to offer discounts for cash, cheque or any payment option the merchant prefers. MasterCard's rules provide flexibility and the freedom to express preference for different payment options.
Credit cards deliver good value to merchants: the costs of credit card acceptance are minimal when compared with the costs of accepting other forms of payment, including cash. Merchants also benefit from immediate, guaranteed payment, ecommerce, global interoperability and faster check-out.
Consumers' interests are protected when merchants honour all cards, and adhere to the Non-discrimination and No Surcharge rule. These rules give cardholders certainty that they can use their card everywhere MasterCard is accepted. They also prevent consumers from having to pay extra when purchasing products with their MasterCard cards, and ensure that MasterCard cardholders are not unfairly discriminated against.
The Competition Bureau's theory, that the rules constitute price maintenance, is simply without precedent – not only in Canada but worldwide. Price maintenance involves actions which are designed to prevent others from lowering their prices to consumers. MasterCard's rules have the opposite effect; they protect consumers from being charged more, they balance the system, expand output, protect consumers, protect the MasterCard system from free riding by dominant merchants, and ensure the efficient operation of the system.
The rules were challenged before the Minister of Finance when he established the Code of Conduct for the Debit and Credit Card Industry. These very rules – the No Surcharge rule and the Honour All Cards rule – were the subject of debate, and the Minister expressly chose not to challenge them. Likewise, the US Department of Justice recently considered the matter and decided not to challenge those rules.
If merchants were to gain the right to surcharge MasterCard cards or not honour MasterCard cards, the inevitable consequence would be to push transactions towards more expensive forms of payment such as American Express. American Express is widely recognized as the most expensive form of card payment, yet there is no challenge whatsoever to American Express' right to impose Honour All Cards and No Surcharge rules. The recent decision of the Reserve Bank of Australia to vary the Standards relating to merchant surcharging on credit and debit cards illustrates that surcharging, where it has been mandated, has been abused.
The above examples illustrate the unintended consequences that could arise from interfering with a balanced and well-functioning payments system.