Retailers pledge constructive and careful action on VISA issue

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A group of 20 key European travel retailers were present at yesterday's Brussels conference to address the subject of cross border overcharges in the VISA credit card system first reported last month (TRW 24/10/02)

The meeting, hosted by Jacques Parson president of Dutch operator Kappe International, considered the next steps within the duty-free industry in bringing a legal case for compensation against VISA, together with a challenge to certain elements of the recent European Commission ruling on the subject. "I see myself as a retailer and a facilitator. The next key steps are to decide a collective budget for the issue, to extend cooperation with EuroCommerce and to go back to our own companies and advise positively," said Parson.

The inbalance in the levels of charging within the VISA system and flaws in the Commission ruling which maintains "the merchant pays" rule were the subject of a presentation by Rob Walker of Retail Banking Research. EuroCommerce secretary general Xavier Durieu said he was pleased to meet a group of retailers that his organisation knows relatively little about. Over the past six years the legal case against VISA and the work of EuroCommerce has been supported by major domestic retailers such as Tesco and Carrefour. However the parties were looking to build a wider coalition of retailers to challenge VISA, as in the US where WalMart joined together with major retail associations.

The meeting heard that this broad coalition of merchants might comprise a travel sector including airlines and ferry operators - such as those present - not just travel retailers, together with domestic retailers. "Retailers have been overpaying card fees by an average 80% and did nothing about it. But there are many technicalities within the VISA system that are not easy for any retailer to understand. Banks compete at the consumer level, but there is absolutely no competition on the acquiring [bank] side," said Durieu.

Banking experts estimate that travel retailers have already been overcharged to the extent of approximately ?70m by VISA's Multilateral Interchange Fee (MIF) system. The case against VISA was supported by a presentation from Dorsey & Whitney lawyer Pierre Bos who talked about legal and lobbying strategies for winning the case which might have two parts. One could involve a challenge to the European Commission ruling, decided in the run up to the introduction of the Euro, which reduces card costs by 20%. The second part could be to register and secure a claim on past overcharges. A class action across Europe before January will almost certainly be needed before VISA acts on the issue.

In his summing up of the meeting, Parsons introduced the draft legal budget that would be necesary to carry forward a case. A part of this would have to be funded in advance across all retail and merchant sectors, not only travel-retail. Legal costs were quoted at just over ?3.9m with a maximum budget of ?6.2m should the case be appealed to the European Court of Justice. It was emphasised that the travel-retail industry would pay only a proportion of these estimated costs based on a formula which would be determined in the future. The full budget as outlined in Brussels is shown here:

                                                    Minimum              Maximum
European Court of First Instance:    ?2,732,240            ?4,387,580
European Court of Justice:              ?1,043,000            ?1,622,500
Safeguarding Tort Claim:                 ?67,000                ?167,500
Negotiation:                                   ?59,950               ?76,700

Total:                                            ?3,902,190           ?6,254,280

Meanwhile the Association of European Airlines (AEA) based in Brussels together with other airline, hotel and maritime associations had been contacted and were beginning similar discussions within their own sectors. "The same process is taking place in other sectors," said Parson. "We are not alone but part of a merchant-wide front." In some countries, such as Australia, individual actions against VISA on the same issues are already progressing and card fees are expected to come down. Similarly in the UK the Office of Fair Trading has an action against Mastercard which will affect VISA.

It was agreed that the initial meeting could only create a framework from which attendees must report back to their organisations and move quickly forward in a spirit of positive energy. Time is also vital, since any case that might be brought against VISA would need to be completed and filed by January 31 2003.

• See Duty-Free News International December 1 issue for a full report.
• To receive an executive report of the conference or for further information contact Graham Austin at: Gbat Beckenham Management and Public Affairs Consultants: +32 2 726 1759 or by email at: enquiries@gbatbeckenham.co.uk