Minister of Finance Yuval Steinitz is seeking to foster competition in the credit card market. He has submitted a bill, jointly formulated by Accountant General Shuki Oren, the Ministry of Justice, and the Bank of Israel, to the ministerial legislative committee. The bill's objectives are "to straighten out failures in the credit card market and increase competition, to the benefit of small businesses in general and in outlying areas in particular."
The bill comes after three and a half years of delays and lobbying and a number of private members bills. It is based on the recommendation of a committee headed by Oren's predecessor, Yaron Zelekha, which were submitted in February 2007 and adopted by former Minister of Finance Ronnie Bar-On in March 2008.
One of the bill's key objectives is to increase competition in credit card clearing. The bill defines a company that has at least 10% of the credit card market as a big issuer and will be required to allow other companies to clear transactions made with its credit cards. Currently, only Isracard Ltd. meets this criterion.
This proposal will increase competition in the clearing market, and allows, especially for small businesses who have little bargaining power, to choose which credit card company to contract with to honor the main credit cards now on the market.
In 2006, an agreement between Antitrust Authority director general Ronit Kan and the three credit card companies - Isracard, Leumi Card Ltd., and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) - allowed cross-clearing.
Isracard views the bill as infringing on its intellectual property, and the company is reviewing its options. The company said in response, "Isracard supports fair competition and acts in the best interests of its customers and businesses. We have not yet seen the bill. When we do, we'll study it details and respond accordingly."
The bill also grants the Banking Supervision Department the authority to set and supervise cross-clearing fees. A credit card executive told "Globes" in response that the bill is unnecessary "because the arrangement with the Antitrust Authority has dramatically changed the market and created competition in it. This bill therefore makes no contribution to competition. Why bring in a new regulator into a competitive market?"
Published by Globes [online], Israel business news - www.globes-online.com - on July 28, 2010
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