09 April 2008

MLex: EC looks into anti-trust concerns in bank card standard-setting

The European Commission is looking into standards-setting for payments cards by banks and banking associations after Eurocommerce, the association of Europe's retailers and wholesalers, lodged a fresh complaint challenging the way the payments industry co-operates in agreeing technical requirements.

The lobby group has been the leading plaintiff in the case against MasterCard's interchange fees over the years and is now seeking to have the commission intervene in the governance structure of the European Payments Council (EPC), a forum of banks and banking associations set up to agree industry-wide standards for the sector.

The complaint was lodged on 25 January, alleging that the EPC has engaged in anti-competitive practices, through its structure infringing cartel law and potentially through the individual or collective dominance of its members. DG Competition followed this with a letter to the banking body on 6 March seeking answers. The EPC was due to respond last week.

Eurocommerce's concerns focus on the exclusion of the main users of cards – i.e. retailers – from talks over standards-setting. The EPC had previously invited Eurocommerce to sit on a consultative body but the lobby group is unhappy and is now seeking a more central role in decision-making. 

Furthermore, the complaint drives at collusion in the setting of standards through the so-called 'SEPA cards framework' (SCF): rules which allow payments cards to be used across Europe under the same conditions as they are used at home – a keystone in the construction of the Single Euro Payments Area. The SCF quashes competition and leads to expensive, anti-competitive standards, according to Eurocommerce. 

In the past, Competition Commissioner Neelie Kroes has called the EPC's governance an “area of concern”. In speeches over the winter Kroes said she was aware of the complaints from retailers and consumers, who claim they are not properly involved in the standardisation work of EPC. These grievances have now led to a formal complaint. 

“I do think that it would be useful to set up an effective forum in which these views can be properly aired. And we can't exclude that these stakeholders may even come up with business models and technical proposals which are also of interest to the banking community,” she said in a December speech, echoing these comments in a further speech in January. 

The EPC agreed a new charter in June 2006 and, in the past, has championed consultation in working groups including all stakeholders and at national level, which back up their work on cards and standards. It seems that this move did not satisfy the retailers and now regulators are taking up the cause. 

In her speech last December, Kroes also reminded the EPC of its obligations to stay within the bounds of competition law.

“The design and implementation of the SEPA project are [...] the result of agreements and co-operation between undertakings which are normally deemed to be competitors. For this reason the commission, and in particular my Directorate-General for Competition has an important role in ensuring that both SEPA and the EPC deliver this project in line with the EC competition rules,” she said.

But this is not the first time the commission has looked into the functioning of the EPC, having sent information requests last summer looking into the SCF (see here). But is seems this move was not enough to dampen the concerns of Eurocommerce and it lodged its formal complaint several weeks after the EPC made commitments to improve the SCF.

The EPC had also been chastised by the European Central Bank for “under-developed” work on cards standards. Gertrude Tumpel-Gugerell – the Eurosystem's mouth-piece on payments issues – also stated last year that “the EPC should re-evaluate its goals and possibly its working procedures”. 

The EPC was established in June 2002 to represent the interests of the European payments industry, defining common positions and agreeing on implementation. It has 67 members including national and international banks such as BayernLB, Societe Generale and Banca Intesa, as well as associations such as the European Banking Federation and APACS. It is the third pillar – alongside the commission and the ECB – in achieving SEPA. 

By Lewis Crofts

© Graham Bishop