Competition Authority Notification No: CA/1/98: MBNA International Bank Ltd
Decision No. 522
Notification under section 4 of Competition Act 1991 — Agreement concerned standard credit card affinity agreement — Affinity groups to provide MBNA with mailing lists — MBNA to market their credit cards to people on mailing lists — Relevant market the issuance of credit cards and provision of credit card services — Market for issuance of credit cards opening up in State — Affinity group agreed not to develop rival programme without consent of MBNA — Nothing to prevent other credit card issuers from providing similar services — Market highly competitive.
Notification was made by MBNA International Bank Ltd. on 6 January 1998 with a request for a certificate under Section 4 (4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a certificate, a licence under Section 4(2) in respect of a Standard Credit Card Affinity Agreement.
(a) Subject of the Notification
2. The notification concerns a Standard Credit Card Affinity Agreement between MBNA International Bank Ltd. and the Affinity Groups. The agreement is a marketing arrangement whereby the Affinity Groups provide to MBNA access to their mailing lists and MBNA (in conjunction with the Affinity’ Group) market their credit cards to people on the Affinity Group’s mailing lists.
(b) The Parties Involved
MBNA is a wholly owned subsidiary of MBNA America Bank, N.A. a company incorporated in the United States of America and having its address at Wilmington, Delaware, 19-884-0785, USA. This notification concerns rights and obligations arising from a standard Credit Card Affinity Agreement (the “Agreement”) which MBNA International Bank Limited, a company registered in England and Wales acting through its Irish Branch Registered Number E3873 at 46 St. Stephen’s Green, Dublin 2 (“MBNA”) proposed to conclude or make with various organisations (“Affinity Groups”).
4. At the date of notification MBNA had no sales or turnover in relation to credit cards in the State and, as it is a new entrant to the market, it does not have market share data readily available, either by sales or turnover. MBNA stated that they do not have any substantial interest in any other company competing in the market affected.
(c) The Products and the Markets
5. The notifying party claimed that the nature of the services affected by the Agreement is the provision of credit card services to consumers. The Agreement relates to the marketing of MBNA’s credit card programme, specifically designed for the purpose (the “Programme”), to Irish resident customers and employees of the Affinity Groups.
6. The notifying party claimed that the market for credit card products is global. However, the Agreement applies only to the State. The relevant credit cards were designed for compliance with Irish law and cannot be marketed in any other jurisdiction.
7. The notifying party stated that the Irish credit market is a subset of the total Irish market for payment cards. That total market can be divided into two sections:
(a) payment cards offering domestic and international acceptance; and(b) payment cards accepted only in one or more domestic stores.
8. Within each of those sections there can be a number of competing product types:
(a) credit cards where credit is advanced and may be left outstanding;(b) charge cards where credit is advanced but must be repaid in full at the end of each billing period (usually one month); and(c) debit cards where no credit is advanced, the card merely being used to access a current account.
9. The notifying party claimed that the Agreement only related to credit cards (product type (a), above) offering domestic and international acceptance (market section (a), above). Although the notification only concerns that part of the market so described, the notifying party stated, that it should be considered in the wider context with the other product types (in both market sections) being seen as substitute and competing products.
(d) Structure of the Market
10. The notifying party claimed that the provision of credit card services is divided into two levels, credit card issuers (“Issuers”) and credit card acquirers (“Acquirers”). In addition, to enable a credit card to be accepted for payment it is necessary for the relevant Issuer and Acquirer to be a member of the same payment system. The two main international payment systems are VISA and MasterCard both of which are wholly owned by their respective members. There are 21,000 bank owners of Visa world-wide. The payment systems provide a global framework and rules for use of affiliated credit cards. Issuers provide the actual cards, related account and credit facilities. A consumer’s credit card contract is with an Issuer as opposed to a payment system and in...
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