CADE signs agreement with Itaú, Rede and Hipercard to stimulate the competition in the market of electronic means of payment

The Tribunal of the Administrative Council for Economic Defense – CADE signed, on 5 April 2017, two Cease and Desist Agreements (TCC in its acronym in Portuguese) related to an investigation of anticompetitive practices in the Brazilian means of payment market (credit and debit cards). The deal was signed with Itaú Unibanco S/A and the companies Rede S/A and Hipercard under the former’s control.

Rede is a subsidiary of Itaú Group, operating within the accreditation of business premises regarding electronic payment cards’ transactions (debit, credit, prepaid, etc.) Rede is currently the second major company in this market, with approximately 36% of market share. Hipercard, on the other hand, is a debit and credit card payment brand, also fully controlled by Itaú Group.

The end of exclusivity between Rede and Hipercard

The first TCC was signed jointly by Itaú bank and Hipercard. The purpose was to put an end to the exclusivity between the payment brand Hipercard and the accreditor Rede – both part of the same economic group. 

 According to the  investigation  carried out by the General Superintendence (Administrative Inquiry 08700.000018/2015-11), there are some exclusivity relations between  payment brands and specific accrediting financial institutions that do not allow the transaction, in the same equipment, of all debit and credit card payment brands. This conduct compels business premises to hire Rede’s services in order to be able to use Hipercard cards as a payment system.    

Aiming at promoting the competition within this market, the TCC determines that Hipercard will have to allow Rede’s competitors to operate their credit and debit card transactions through its payment brand, ending Hipercard and Rede exclusivity. 

The TCC has the duration of two years. During this period, Hipercard will have to comply with specific goals related to use of other accreditors than Rede, which should be available   for approval on 30 April.

CADE hopes eventually to increase the competition in this market, allowing other accreditors to have more space for development and business premises to have more options while hiring an accreditor. A more effective competition in this market could result, for example, in cost reductions related to discount rates, pre-payment credit and equipment rental.

Reciprocal use of Pinpads by the accrediting financial institutions

Rede signed the second TCC in order to allow the insertion of cryptographic keys of other accrediting brands than Hipercard in its Pinpad equipments – machines that enable credit and debit cards transactions in the retail market.

Pinpad equipments allow the operation of several accreditors within the same machine. In other words, a business premise may contract the services from several accreditors and still use one single equipment, reducing costs. On the contrary, if the equipment does not have the key of a specific accreditor, the business premise will only be able to use this accreditor’s services through a second equipment’s acquisition, generating more costs to business and discouraging the devices’ substitution. 

The General Superintendence verified that Rede and its main competitor, Cielo, inserted reciprocally their respective cryptographic keys, which means that one can use the other’s pinpad. Nevertheless, both companies refused to provide the same access to smaller competitors, hindering their entry and development within this market. 

By means of the TCC, Rede is committed to provide access, in its Pinpads, to all accreditors, indiscriminately, in the case these companies allow it the same treatment in their own devices.

CADE expects that this measure will allow a larger insertion of smaller accreditors in the market, promoting more competition and more options, and reducing costs to shopkeepers and consumers. 

Investigations

The agreements’ signature results in the suspension of the investigation regarding the TCC’s signatories, until the parties have fulfilled the agreements’ obligations.

The Administrative Inquiry remain opened, however, regarding Cielo, Bradesco, Banco do Brasil, Elo, Alelo, Amex and Ticket. CADE’s General Superintendence is investigating these companies due to similar practices.