Visa Canada is standing by its no-surcharge policies, and claims the Canadian Competition Bureau's legal challenge against those policies would be harmful to consumers if successful.

Visa Inc. and MasterCard Inc. prohibit Canadian merchants from applying a surcharge to a purchase made with a high-cost card, and the bureau is asking that the ban be lifted.

In December, the bureau filed an application with Canada's Competition Tribunal and alleged Visa and MasterCard impose restrictive and anticompetitive rules on merchants who accept their credit cards.

The Competition Bureau filed the application to challenge certain rules of the card brands under the price-maintenance provisions of the Competition Act. Lawmakers designed the antitrust law to maintain and encourage fair competition in Canada.

The card brands' rules result in increased costs to merchants who, in turn, pass their costs on to consumers, Melanie Aitken, the bureau's commissioner, said in a press release.

Canadian merchants pay an estimated $5 billion annually in hidden credit card fees, the bureau claims.

"Without changes to the rules, merchants will continue to face high costs for credit card acceptance, while consumers, even those who use lower-cost methods of payment like debit or cash, will continue to pay higher prices," Aitken said.

The bureau said it wants to give merchants the ability to surcharge consumers using credit cards to make up the costs associated with accepting them.

Visa Canada said it created its no-surcharging policy to specifically prevent retailers from imposing a fee on consumers who choose "the convenience, security and reliability of Visa cards over cash and checks."

MasterCard Canada also has expressed its concerns over the proposal.

"If these changes were implemented by the Competition Tribunal, the result would be to enrich merchants at the expense of consumers," Betty DeVita, the president of MasterCard's Canada business, said in an e-mail.

MasterCard's surcharge ban is intended to protect consumers, the company said. MasterCard claims surcharging has hurt consumers in other countries, particularly in Australia. "Since the Reserve Bank of Australia allowed surcharging in 2003, there has been increasing and unjustified surcharging of consumers by certain merchants," it said in an e-mail.

Visa says the surcharges in Australia are as high as 10%, citing a November survey commissioned by the New South Wales minister for fair trading.

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