ACCC v Visa exclusive dealing penalty

In Australian Competition and Consumer Commission v Visa Inc [2015] FCA 1020 the Federal Court of Australia ordered Visa Worldwide Pte Ltd to pay a penalty of AUD$18 million for engaging in the anti-competitive conduct of exclusive dealing over currency conversion services in Australia.

In addition, Visa Worldwide agreed to pay $2 million to cover the cost of the action by the Australian Competition and Consumer Commission.

Visa Worldwide, being the company which contracted with financial institutions in Australia in relation to their participation in the Visa payment card network, admitted that its conduct in implementing and enforcing the restrictive conditions involving the use of Dynamic Currency Conversion in relation to point of sale payment transactions amounted to a contravention of section 47(2) of the Competition and Consumer Act 2010.

Visa imposed conditions on financial institutions that wished to participate in the Visa payment card network which restricted them, in some circumstances, from using services offered by providers of Dynamic Currency Conversion services to process transactions that involved or required the exchange or conversion of different currencies in competition with Visa Worldwide, or Visa entities related to it. The contravening conduct involved not only point of sale payment transactions with an international element, but also cross-border transactions involving the withdrawal of money from automatic teller machines.

This prohibition meant that retail stores, hotels and restaurants could not choose to offer DCC.

Under Section 76(1A) of the Competition and Consumer Act 2010 the maximum penalty is the greatest of the following:
(i) $10,000,000;
(ii) if the court can determine the total value of the benefits that have been obtained — 3 times that total value;
(iii) if the Court cannot determine the total value of those benefits—10% of the annual turnover of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred.

Justice Wigney explained how he calculated the penalty:

“The parties agree that it is not possible to determine the value of any benefit that Visa Worldwide (or any of the Visa entities) obtained directly or indirectly from the contravening conduct for the purposes of s 76(1A)(b)(ii) of the Act. It is, however, admitted by Visa Worldwide and agreed by the ACCC that Visa Worldwide’s annual turnover for the purposes of s 76(1A)(b)(iii) of the Act was AU$331 million. Accordingly, the maximum penalty payable by Visa Worldwide in respect of its admitted contravention of s 47 of the Act is AU$33.1 million. ….

In determining the appropriate penalty, regard can and should be given to the size and financial position of Visa Worldwide. Whilst there is no detailed evidence concerning the financial position of Visa Worldwide, it is clear from the size of its annual turnover in the 12 month period preceding the contravention that it is a large corporation with financial capacity to pay a significant penalty. Relevant too is the fact that Visa Worldwide is a wholly owned subsidiary of Visa Inc, a company which had an annual turnover in 2010 of over US$8 billion. Visa Worldwide is part of a global business that conducts the world’s largest payment card network – a network that in 2010 processed more than 70 billion transactions with a transaction value exceeding US$5 trillion.

The seriousness of the contravening conduct, the nature and extent of the contravening act, the circumstances in which that act occurred, and the nature and size of the contravener and the business conducted by it, all warrant a very sizeable penalty. The maximum penalty in this case of AU$33.1 million is also a relevant signpost.

Perhaps the primary consideration, however, is specific and general deterrence. The penalty imposed in this matter should send a clarion call to large multinational corporations that have operations in Australia that whatever decisions may be made globally, Australia will not tolerate conduct that contravenes its competition laws and will not tolerate conduct that is likely to have the effect of substantially lessening competition in Australian markets. Given the size of Visa Worldwide and the global Visa business, only a very sizeable penalty is likely to operate as an effective deterrent here.

Only a very sizeable penalty is likely to ensure that in the future the risk of incurring a penalty for contravention of the Act will not be treated as a mere cost of doing business in Australia….

In all the circumstances, the joint submission of the parties to the effect that Visa Worldwide’s contravention is of mid-range seriousness and warrants a penalty towards the middle of the available range should generally be accepted. Whilst the contravention is very serious, it is not the most serious case one can imagine”

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