The Ministry of Finance has initiated a bill to open the credit card and the cross-clearing market to full competition. The bill will be submitted to the ministerial committee on legislation in a few weeks. Accountant General Shuki Oren is responsible for the staff work on the bill, which will probably include clauses to encourage the entry of new credit clearing companies into the market.
The bill is based on the recommendations of a committee headed by former Accountant General Yaron Zelekha, which were submitted in February 2007 and approved by former Minister of Finance Ronny Baron in March 2008. The bill will be submitted to the Knesset in October, when it begins the winter session. Knesset Economic Affairs Committee, chaired by MK Ophir Akonis (Likud), will handle the bill.
The bill's main item calls for the full cross-clearing of all credit cards and credit card brands. Partial cross-clearing was implemented in October 2006 as part of a settlement between Israel's three credit card companies - Isracard Ltd., Leumi Card Ltd., and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) - and Antitrust Authority director general Ronit Kan.
That settlement does not include the clearing of exclusive brands, such as American Express, Diners Club, and Isracard. The settlement gives Isracard a significant competitive advantage: if a business wants to work only with one clearing company, only Isracard can provide the service for all credit cards.
The settlement also includes a clause, put in at the insistence of Isracard, which stipulates that in the event of legislation on clearing, all the credit card companies have the right to notify to the Restrictive Trade Practices Tribunal within 90 days that the settlement is null. Isracard will reportedly quit the settlement in response to the legislation, and will not allow its competitors to clear its credit cards.
Under the settlement, the credit card companies undertook to cross clear all credit cards and to gradually reduce their cross-clearing fees from 1.25% of a transaction in 2006 to 0.875 in July 2012. The fee is currently 1.1%, and the next reduction, to 0.975%, will come into effect in July 2010.
Published by Globes [online], Israel business news - www.globes-online.com - on August 10, 2009
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