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Szöveg. The Hungarian MIF case. Boris Martinovic Hungarian Competition Authority RCC, St.Petersburg, 15 March 2012. Premises and market developments Enforcement action (the proceeding) Immediate aftermath Market survey on card acceptance. Outline. Premises and market developments.

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The Hungarian MIF case

Boris Martinovic

Hungarian Competition Authority

RCC, St.Petersburg, 15 March 2012

Premises and market developments

Enforcement action (the proceeding)

Immediate aftermath

Market survey on card acceptance

1995/1996: card payments start to become an important element of payment systems in Hungary

An informal „forum” is created by several Hungarian banks

to discuss card market related issues (fraud, developments, standards, etc.)

to set intechange fees

Important role of Visa and MasterCard

Other banks join the system on the go

development of the market card schemes
Development of the marketCard schemes

Visa and MasterCard became the two main players

Combined market shares:

debit: > 98% (no competitor)

credit: > 95% before 2005, then Amex entered the market to gain a market share > 10%

MasterCard is the leader:

market shares constantly above 60%

dominant position?

but: Amex gained market share at the expense of MC

Important role in the development of the market

development of the market card issuing
Development of the marketCard issuing

Fast growth in the years 2000 – rapidly increasing number of cards

Predominantly debit cards (> 80%), irrelevant number of charge cards

Almost every bank issues debit cards

OTP’s share in issuing was above 50%, no other bank above 10%

development of the market card acquiring
Development of the marketCard acquiring

Constant and large growth in number of POS

Several banks on the market, but two leaders:

OTP and K&H with a combined market share above 90%

market share of OTP above 60%

Every acquirer is issuer as well

Specialty: large number of on-us transactions (OTP)

development of the market interchange fees msc
Development of the marketInterchange fees & MSC

Set by the banks at the forum

Guidance by Visa and MasterCard

Uniform interchange fees for Visa and MasterCard

Average interchange fee: > 1% (on-others)

Average MSC: 1.2% - 1.4% (both on-us and on-others!)

Lower interchange fees for petrol stations: ~ 0.3%

initiation of the proceeding
Initiation of the proceeding

Enforcement action initiated on 31 January 2008

Parties: 23 banks, Visa, MasterCard

Legal basis: Article 101 (1) TFEU & Article 11 (1) of the Hungarian Competition Act

Presumed infringement: MIF agreement concluded between the banks can restrict competition

findings forum
Findings Forum

A forum was established to discuss issues in the card market

Participants: Hungarian banks, Visa, MasterCard

Uniform treatment of Visa and MC

Several topics, including interchange fees

Voting system for acceptance of proposals

Not a legal entity, but its decisions were binding

„Articles of Association”: one of the goals was to „ensure favourable development of prices”

Dispute on whether to make it a formal legal entity

findings setting of interchange fees
Findings Setting of interchange fees

Bilateral agreements between 1991 and 1994 (few banks)

From 1995 the fees are set within the forum

Uniform fees for Visa and MasterCard to ensure same acceptance of both brands by the merchants

Agreement on minimum MSC as well

Threat of sanctions for non-obliging banks

Evidence of intent to avoid a „fee war”

Evidence of interchange fee representing floor of MSC

Setting of interchange fees was seen as a potential abuse of competition rules by some banks, Visa

decision parties to the agreement
Decision Parties to the agreement

Primarily: 7 banks concluding the agreement in 1996

Secondly: all banks entering the card market later on (from date of entry)

They accepted the agreement without objections

Visa & MasterCard

They enabled and facilitated the conclusion of the agreement

They provided help in the process and in running the system

They new about the uniform setting of fees, which was in their interest as it eliminated one aspect of competition between them

decision restriction by object
Decision Restriction by object

Uniform setting of interchange fees is a restriction by object, because:

Uniform setting of fees eliminates an important element of price competition between Visa & MC

Parties themselves also considered the interchange fees to have a limiting effect on the acquiring market competition (floor of MSC)

Setting uniform interchange fees is in itself an agreement of such nature which necessarily restricts competition between acquierers

The parties were aware of the fact they were limiting downward pressure on MSC with these actions

One of the goals of the forum was to favourably manipulate prices

Other proclaimed goal was to provide same acceptance for both card brands

decision restriction by effect
Decision Restriction by effect

Interchange fee serves as a floor for the MSC  by setting the floor, the parties restricted competition on the acquiring market

Uniform setting of interchange also had the effect of restricting competition between Visa & MC

Without the agreement different fee structures would have prevailed

Evidence of failed proposals to decrease fees because of the agreement (supermarkets, 2004)

decision exemption
Decision Exemption

Criteria for exemtion were not all met

There might be efficiencies in the system, but:

No evidence of the restriction (especially in case of uniform setting) being necessary and of appropriate measure

No evidence of consumers benefiting from the efficiencies properly

The parties failed to show efficiencies from uniform setting of fees

decision commitments
Decision Commitments

Remedy package offered by the banks:

Improve card payment in Hungary through

educational campaigns

supporting card schemes in promoting card usage

Improve card payment standards

Improve acceptance

By providing card payment in public sector

The commitments were rejected by the Council, as they were inappropriate to remedy the infringement

decision sanctions
Decision Sanctions

22 out of 23 banks and Visa & MC were found „guilty” of restricting competition based on Article 101 (1) TFEU & Article 11 (1) of the Hungarian Competition Act

7 banks (parties to the original agreement in 1996) and Visa & MC were fined

Total fine for banks: cca. EUR 3.57 million

Fines for card schemes: cca. EUR 1.76 million each

When calculating the fines: total amount of domestic interchange fees between 2004-2007, and market shares in 1996 were taken into account

new hungarian fees
New Hungarian fees

Interchange agreement was abolished

MasterCard unilaterally introduced new domestic interchange fees for Hungary

Visa decided to apply the cross-border default rates

judicial outcome
Judicial outcome

Parties fined by the GVH lodged an appeal with the Budapest Metropolitan Court


The agrrement was not contrary to competition rules

The GVH did not properly look into the actual effects

The decision should be amended or annulled

The court suspended the proceeding with respect to the MasterCard case before the General Court (T-111/08)

market survey on acceptance
Market survey on acceptance

The GVH appointed a market research company to make a survey

Experiences and opinion of merchants regarding payment card transactions

Scope: large size retail units, fuel distributors, hotels, restaurants, airlines, travel agencies, online companies and webshops

Methodology: personal interviews with financial managers


Card acceptance depends significantly on the size and activity of the merchants

Some sectors (large retailers, petrol stations) more affected by cards than others (car dealers)

Price of card acceptance is a factor

14% of merchants would accept cards if the costs decreased

Low awareness of interchange fees (level, role, concept)

Cards vs. cash: Cash faster and cheaper, but preferred by only 6% of the merchants

Pass-trough of cost reductions: unlikely, but varies greatly across sectors

Thank you for your attention!