Dispute with Visa
An increasing number of South Korean card issuers are saying they have no chance against winning a complaint with the Fair Trade Commission (FTC) against Visa Card for its unilateral decision to increase a commission charge for the usage of overseas payment networks. It will put a financial burden on domestic card companies.
According to specialized credit financial industry sources on March 11, domestic card issuers received briefings on the relevant complaint in Yulchon LLC, a full-service international corporate law firm headquartered in Seoul, at the end of last year. An official from Yulchon asked card companies to collect more corroborative facts that back up their claims, saying, “There are not enough documents and data to win against Visa.”
An official from a domestic card issuer said, “We sent an additional evidence that Visa’s claim that it has raised its commission charge for the usage of overseas payment networks not only in South Korea but also in China and Japan is false but this has made little progress up to now. It is true that we have a slim chance to beat Visa to such an extent as to the case will go flop.”
Another official from the industry said, “Under the current Fair Trade Act, a leading operator is considered holding a monopoly when it accounts for 50 percent of total sales in a market. Visa is expected to take up less than 50 percent of sales in an entire market even when the company’s market is limited to South Korea alone.” In short, the claim about Visa’s monopoly power abuse will be a long shot.
The FTC will make a final decision on the issue by the end of the first half of the year.
Meanwhile, domestic card companies are absorbing the increase of 0.1 percent among the 1.1 percent of commission charge for the usage of overseas payment networks applied by Visa from January last year and the figure is estimated at some 10 billion won (US$9.34 million). According to the data from the Bank of Korea last month, the total amount of card payment transactions abroad stood at US$17.11 billion (18.33 trillion won). About half of South Koreans use Visa Card when making payment by credit card for transaction in other countries.
With this standard, the amount of overseas payment transactions by Visa Card will be at least US$8.56 billion (9.16 trillion won) and the additional commission charges to be paid by domestic card issuers to Visa Card will reach US$8.55 million (9.16 billion won).
Domestic card companies filed a complaint with the FTC against Visa Card in October 2016, claiming that the unilateral notification of Visa Card, which has a dominant position in the overseas payment market, to increase its service fees from 1 percent to 1.1 percent is basically unfair. A commission charge for the usage of overseas payment networks is fees paid by domestic card issuers to international credit card brands, such as Visa and Mastercard, when their members make payment abroad.