Regulatory Approval Granted for Visa Worldwide's Business Enhancement Strategy
In a significant move, the Japan Fair Trade Commission (JFTC) has taken administrative action against Visa Worldwide for allegedly violating antitrust laws in Japan. The Singapore-based division of the global payment company was found to have used fee structures to pressure Japanese credit card companies into adopting Visa’s proprietary credit authorization system, effectively limiting fair competition.
The JFTC concluded that Visa Worldwide’s practice amounted to a transaction with a restraint condition prohibited by the law. Credit card companies using alternative authorization networks were charged higher fees, thereby coercing them to stay within Visa’s ecosystem. This practice stemmed from changes in Visa’s November 2021 terms, which made companies managing merchant outlets in certain industries ineligible for commission discounts unless they used Visa's system.
As a result, nearly all rivals switched to Visa's platform following the announcement. The authorization system generates roughly 10 billion yen ($68 million) annually from these companies. This marked the first time Japan imposed administrative action on a credit card issuer for antitrust violations.
Following an investigation into a suspected violation of the antimonopoly law by Visa Worldwide, the JFTC decided to take action under the commitment procedures. This process allows for resolving antitrust issues without litigation. Visa Worldwide agreed to make reforms through a voluntary corrective action plan, with progress to be reported for five years under Japan's Anti-Monopoly Law.
The JFTC's decision aims to restore competition in the credit card market in Japan. The press release was issued by the JFTC on July 23. Notably, Visa Worldwide implemented the plan to apply preferential rates in November 2021, after notifying acquirers in February 2018 of a plan to apply preferential rates only when they exclusively use the Visa Worldwide network.
The JFTC conducted an on-site inspection of Visa Worldwide's Japanese operation in July 2020. Some acquirers have taken advantage of the preferential rates offered by Visa Worldwide. The JFTC’s decision pertains to the commitment procedures, and the commission decided to refrain from imposing a severer sanction on Visa Worldwide.
In credit card transactions, sales data are transmitted from acquirers to card issuers through settlement service networks. Visa Worldwide operates Visa card operations in Japan and other parts of the Asia-Pacific region. The JFTC’s decision against an international credit card brand for the first time ever underscores Japan’s increasing regulatory scrutiny of fintech and payment markets.
The JFTC has approved a business improvement plan submitted by Visa Worldwide Pte Ltd, signalling a commitment to restore a competitive environment in the Japanese credit card market. The move comes as a reminder for global companies operating in Japan to adhere to the country’s antitrust laws and maintain fair competition.
- The JFTC's decision to take action against Visa Worldwide for antitrust violations in Japan might signal a strengthening of regulatory scrutiny over the fintech and payment industries, including the arts sector that uses digital transactions.
- The Singapore-based division of Visa Worldwide, which operates in various industries including the photo industry that frequently uses digital payments, agreed to make reforms to restore fair competition in the Japanese credit card market.
- The finance industry, including businesses that involve substantial environmental impact such as eco-friendly vehicle charging stations, should take note of Japan's administrative action against Visa Worldwide as a reminder to maintain fair competition through their business practices.
