February 4, 2013 9:14 pm

Visa probed over currency conversions

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Australia’s competition watchdog launched a case against Visa, alleging the company abused its market power by preventing customers from using a currency of their choice when shopping.

The Australian Competition and Consumer Commission will ask a federal court to rule on allegations that the world’s largest payment network is actively limiting consumer choice by preventing retail stores in Australia from offering so-called dynamic currency conversion services if they did not have the system in place before May 2010.

In addition, Visa is also alleged to have banned other businesses from offering the service at automatic teller machines from October 2007 if cardholders withdraw cash using Visa cards.

“The ACCC is concerned that Visa sought to stop the growth of competing dynamic currency conversion (DCC) services and, as a result, limit the choices available to consumers,” said ACCC chairman Rod Sims.

Unlike DCC, if a cardholder uses Visa’s own currency service the exchange rate is not disclosed by Visa at the time of purchase and is often set higher than the floating currency rate used by DCC.

Visa earns less when a cardholder chooses to use DCC than when they use Visa’s own currency conversion services, the regulator said in a statement on Monday.

“Travellers to Australia using a Visa payment card do not get to choose who does their currency conversion when withdrawing cash from an ATM. In particular, they are denied the ability to know the cost of transactions in their own currency at the time the transaction is made,” Mr Sims said.

Visa said it would “vigorously defend itself against claims by the ACCC that our rules on dynamic currency conversion infringe Australia’s competition laws.”

It confirmed it does not allow currency conversion at automatic tellers, but it said it does permit it at merchant stores, according to a company statement.

The parties are due in court in Sydney on March 14 for an initial directions hearing.

Last year, Visa was part of a $6bn settlement in the US alongside MasterCard after a seven-year battle with US retailers. The US merchants had accused the payment networks of fixing the price of fees retailers must pay every time consumers use cards for purchases.

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