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15 August 2019
When buying goods and services, consumers are often asked whether they want to pay by cash or card. Bank cards are now a part of everyday life; according to a recent sector inquiry by the Hungarian Competition Authority (HCA), the number of Hungarian merchants which accept them increased by approximately 76% between the first quarter of 2013 and the first quarter of 2018.
The increase is partly due to initiatives encouraging merchants to accept bank cards, such as the interchange fee cap which was recently introduced by the legislature. Further, the Ministry of Finance introduced a point-of-sale (POS) terminal installation programme to encourage small merchants (with a quarterly payment turnover of less than HUF1 million) to enter the bank card market, which has contributed to a significant reduction in transaction costs.
However, quick growth such as this always poses a risk to the balance between market players and competition.
In 2017 the HCA initiated a sector inquiry into the bank card acceptance market.(1) The scope of the inquiry included:
The HCA will launch a sector inquiry if it suspects that competition might be distorted in a specific market sector. In so doing, it asks the major market players to collect data, which it compiles into a final report. This report can form the basis of numerous other actions (if required), such as the initiation of competition supervision proceedings or the issue of recommendations to all market players.
The sector inquiry into the bank card acceptance market predominantly focused on whether:
The sector inquiry established that the card acceptance market is highly concentrated, with OTP Bank being the most significant market player. New players have recently entered the market and subsequently increased competition, but the market is still considered to be oligopolistic.
The information and data provided by the Hungarian National Bank and other market players revealed no market failures that required the HCA to undertake competition proceedings. The market was found to be competitive and functioning in accordance with the relevant regulations. Further, the inquiry did not establish that the cost difference between the bank card acceptance services of smaller and larger merchants was a result of distorted competition on the market.
However, the inquiry revealed certain circumstances which affect competition on the market, which prompted the HCA to propose legislative changes and provide recommendations in its final report.
To stimulate further growth in the market, the HCA made a number of recommendations to both the legislature and market players.
The HCA recommended that the legislature:
The HCA recommended that market players revise their fee policies, especially with regard to:
Further, merchants have claimed that they do not receive payment for purchases until several days after they have been made. In this respect, the HCA recommended that banks speed up the crediting process of card transactions. Finally, the HCA has suggested launching awareness programmes, as its inquiry outlined that neither merchants nor consumers on the market in question are aware of the benefits of card payments.
Accepting bank cards is advantageous for all and helps to curtail the grey economy. The extension of the POS terminal programme, tax promotions and faster crediting of card transactions could contribute to fair competition and encourage more merchants to enter the market. The HCA's inquiry demonstrates that the card acceptance market has been successfully promoted, which has helped new market players and small merchants to enter the market. To achieve further growth, merchants and the legislature should follow the HCA's recommendations in order to achieve a cash-free future.
For further information on this topic please contact Anna Turi or Márk Kovács at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email (email@example.com or firstname.lastname@example.org). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
(1) Further information is available here.
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