VZCZCXRO8096
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHUP #0717 2731548
ZNR UUUUU ZZH
R 301548Z SEP 09
FM AMEMBASSY BUDAPEST
TO RUEHC/SECSTATE WASHDC 4536
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS BUDAPEST 000717 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EUR/CE MORE, EB/OMA, INR/EC, TREASURY FOR 
ERIC MEYER, JEFF BAKER, LARRY NORTON; COMMERCE FOR SSAVICH 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PREL HU
SUBJECT: MASTERCARD, VISA EUROPE, AND BANKS FINED FOR 
NON-COMPETITIVE BEHAVIOR 
 
REF: BUDAPEST 591 
 
¶1. (U) On September 24, the Hungarian Competition Authority 
(GVH) announced a fine of USD 10.4 million against Visa 
Europe, MasterCard, and several commercial banks for 
inhibiting competition by charging uniform interchange fees 
for card transactions.  (Note:  Interchange fees are fees a 
merchant bank pays a customer's bank when merchants accept 
cards using card networks like Visa or Mastercard for 
purchases.  End note). 
 
¶2. (U) The GVH determined that an agreement between Visa 
Europe, MasterCard and seven financial institutions in 1996 
to charge a uniform interchange fee for card transactions 
limited and distorted competition.  The GVH based its 
determination on the fact that interchange fees of 
international banking card transactions had been different 
both before the 1996 agreement and after the agreement was 
terminated in 2008.  According to GVH panel chair Tihamer 
Toth, "Competition between the two card firms and the 
card-accepting banks was distorted and limited" as a result 
of the agreement. 
 
¶3. (U) The GVH fined Visa and MasterCard approximately USD 
2.6 million each.  The fined commercial banks include 
Budapest Bank (a GE Money Bank), Hungary's OTP Bank, MKB 
Bank, CIB Bank, Erste Bank, K&H Bank, and ING Bank. 
MasterCard, Visa Europe, and several of the banks involved 
indicated they would appeal the determination when they 
receive the formal GHV ruling.  They maintain that their 
cooperation was publicly disclosed, and that the Hungarian 
National Bank (MNB) was not only aware of it, but also 
provided assistance in reaching the agreement. 
 
¶4. (U) The GVH has broad authority to investigate any case 
with "a basic effect on competition," regardless of the 
business sector.  In 2008, the Unfair Commercial Practices 
Act introduced a special division of powers in the financial 
sector in which cases that have no material effect on 
competition will come within the competence of the Hungarian 
Financial Supervisory Authority (HFSA), and those that do 
will be handled by the GVH.  Recently, the Hungarian 
Financial Supervisory Authority (HFSA) has come under fire 
for being overly lenient with the financial sector (reftel). 
 
¶5. (SBU) Comment.  The GHV is generally seen as an important 
consumer protection advocate, particularly in reviewing the 
effect of mergers on competition.  The current decision is 
noteworthy for two reasons - the European Commission has not 
yet imposed fines for similar kinds of agreements; and the 
size of the fine, which is among the largest imposed recently 
by the GVH.  Although the GVH indicates that the amount of 
the fine is based on the interchange fees received by the 
banks between 2004 and 2007 and their market share in 1996 
and now, the high fines may also be the result of increased 
government pressure to demonstrate it is tough on the 
financial sector and non-competitive behavior.  End comment. 
LEVINE