Substitute Veto: Prohibition of discounts to means of payment

On August 31st, the President of the Republic presented a substitute veto to the “pro-consumer” bill (Bulletin No. 12409-03), seeking to nullify the rule that would prohibit discounts associated with the use of certain means of payment. 

In this regard, the rule proposed by the bill, and that motivated the presidential veto, states that: “The provider of financial products or services may not restrict or condition that the purchase of consumer goods or services, or the application of additional discounts to the price of these, it is made exclusively with a means of payment managed or operated by the same provider, by a related company or a business support company. “ 

This modification was widely criticized by different organizations, from consumer protection associations to business groups, and even some parliamentarians, mainly for questioning the real benefit it would bring to the final consumer. 

As well, the Executive has argued that the referred rule would present, among others, the following problems: 

  1. According to the interpretation of the wording given by its own authors (Deputy Bianchi and Senator Bianchi), the prohibition would apply not only to suppliers of financial products and services, but also to suppliers of non-financial goods and services that make discounts with a means of payment from a supplier associated or operated by a business support company; all providers of goods and services, such as retail, restaurants, airlines, pharmacies, supermarkets, banks, insurance companies, among others, are included as taxpayers of the prohibition.
  2. The prohibition would affect almost all electronic means of payment used by any business, both debit, creditorprepaid cards; highlighting that in Chile there are 40.4 million payment cards issued, which on average means that there are 2.2 cards per inhabitant. 
  3. There could be an impact onantitrust, especially affecting retail representatives, since one of the main ways theyhave to differentiate themselves from their competitors would be prohibited, based on granting discounts associated with particular businesses or industries for their use. of their issued cards. 

In this matter, it is also noted that the National Economic Prosecutor’s Office (“FNE”), the competent body to protect and promote competition in the markets in the country, in the intervention carried out as a result of the draft Law Bulletin 11.941-03, which contains a rule similar to the one introduced in this project, stated that: i) it does not have antecedents that allow to affirm the captivity of consumers by the cards of one or more commercial houses, because in principle there is free access and free exit from them; ii) consumers usually have more than one credit card, bank or non-bank, which interact, without significant access barriers; and iii) consumers have the possibility to quote and evaluate different options to acquire products, both with means of payment related to the commercial house that offers the product, and without related means of payment. 

In this sense, both the FNE and SERNAC stated, in the indicated motion, that the offer of discounts associated with particular businesses or industries for the use of their issued cards constitutes a legitimate mechanism to attract and retain customers. 

Additionally, regarding another argument put forward by the authors of the indication and that is related to the practice of predatory prices, in the same intervention carried out as a result of the draft Law Bulletin 11.941-03, the FNE maintained that they do not have antecedents or evidence that show this behavior on the part of some market actor. Considering that the actor that carries out the predation must have the intention of obtaining, maintaining or increasing a dominant position in the market, the discounts must be made in a systematic way and not punctual in time, and there is also a reasonable probability of recovering the temporary losses ; characteristics that have not been observed in the national market players, which are rather due to an attempt by commercial houses to retain their customers in the use of their own cards. 

  1. It would have the effect of limiting strategies to compete in the payment method market, obstructing the boom we are seeing in acceptance and innovation of payment methods, such as payment with cell phones through QR codes and virtual wallets. This, in addition to being contrary to the global trend to encourage means of payment over cash, would ultimately harm consumers, who will face fewer offers and worse conditions when buying goods or services, which to a great extent deals with essential goods, such as medicines, food in supermarkets and other establishments, health care, and a series of other businesses that generally associate with means of payment to offer discount days (restaurants, airlines, sports centers , beauty centers, among others).
  2. It would put at risk the access to formal financing that more vulnerable and unbanked sectors have had, especially by restricting competition between issuers of non-bank cards and the trend towards the issuance of prepaid cards and other cards with lower costs for cardholders.
  3. Finally, a ban like this would seriously affect reactivation, especially considering the current period of crisis caused by COVID-19.

Due to all of the above, the Executive made a new normative proposal in this matter, with the following tenor: 

“The provider of financial products or services may not restrict or condition that the purchase of consumer goods or services be made exclusively with a means of payment managed or operated by the same provider, by a related company or by a business support company. 

Likewise, It cannot be offered discounts associated exclusively with a means of payment managed or operated by the same provider or by a related company, when access to said discount is conditioned to the holding of a money credit operation in more than one share. In addition, when these providers offer discounts associated exclusively with the aforementioned means of payment, they must previously inform the consumer of the Total Cost of the Credit, in the event that the consumer freely opts for said credit alternative in more than one installment. 

Additionally, the cash price of the good or service in question must be expressed in all types of advertising, in size, visibility and contrast equal to or greater than the price of the offer or promotion referred to in the previous paragraph. “ 

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