Financial Services Regulation

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Unravelled: Coming this spring: ACCC to monitor large merchants' payment surcharges

2 June 2016

Written by Partner Carolyn Oddie and Associate Theodore Souris

The Reserve Bank has now released a Standard which sets out what payment surcharges will be permitted for the purposes of the new Part IVC of the Competition and Consumer Act 2010 (Cth). The aim of the Standard is to improve competition and efficiency by providing to consumers price signals associated with the actual cost of using certain payment methods. The Standard applies to the following card systems: EFTPOS, Debit MasterCard, MasterCard Credit, Visa Debit, Visa Credit, and American Express cards issued by Australian banks. The ACCC has been given the power to monitor and enforce compliance with new laws prohibiting merchants from charging excessive payment surcharges, with enforcement beginning on 1 September 2016 for large merchants.

Permitted surcharge and the cost of acceptance

A merchant will be able to charge the 'cost of acceptance'. This will be the cost calculated for a particular 12-month reference period. Where this is not reasonably ascertainable, a merchant can estimate the average cost of acceptance, in good faith, based on information it has.

In particular, the cost of acceptance can include:

  • merchant service fees;
  • fees paid by merchants to their acquirer, payment facilitator or payment services provider for rental and maintenance of payment card terminals or for providing gateway or fraud prevention services referable to a scheme;
  • processing fees paid by merchants to their acquirer or payment facilitator including international service assessments or cross-border transaction fees, switching fees, and fraud-related chargeback fees (but not the amount of chargebacks); or
  • where a merchant acts as agent for a principal, fees or premiums paid by the merchant to an entity which is not a related body corporate to insure against forward delivery risk.

In each case, these must be documented or recorded; must take into account any discounts, rebates or other allowances received by the merchant; and must directly relate to card transactions in the relevant scheme. This will not include fees or premiums which are incurred irrespective of the payment method used. The average cost of acceptance will be expressed as a percentage of the total value of card transactions in that scheme for the relevant reference period.

Transparency requirements for acquirers or payment facilitators

The Standard introduces transparency provisions, including requirements for acquirers or payment facilitators to issue monthly statements to each merchant from 1 September 2016. The monthly statement must set out for each scheme's cards:

  • the aggregate cost of elements of the cost of acceptance which are supplied by the acquirer for the month;
  • the aggregate value of card transactions accepted for the merchant for the month; and
  • the total cost of acceptance expressed as a percentage of the total value of card transactions for the month.

The last statement in a 12-month period must also include the above information calculated on an annual basis.


The ACCC will commence enforcement of the new Standard under Part IVC of the Competition and Consumer Act in two stages. 'Large' merchants will be subject to the new rules from 1 September 2016, while other merchants will have until 1 September 2017.

'Large' merchants are those who, together with any related bodies corporate, satisfy at least two of the following requirements:

  • a consolidated gross revenue of $25 million or more;
  • consolidated gross assets of $12.5 million or more; or
  • 50 or more employees.

The reason for the two stages of enforcement is that large merchants are more likely to surcharge but also more likely to be able to calculate their cost of acceptance. Smaller merchants are less likely to surcharge and less likely to be in a position to assess their cost of acceptance. By 1 September 2017, it is expected that smaller merchants will have received an annual statement from their acquirer or payment facilitator, which will assist them to determine their average cost of acceptance.

The ACCC has reminded all businesses that the provisions of the Australian Consumer Law, including those regarding false or misleading representations, will continue to apply. As a result, businesses should be careful not to mislead consumers as to the nature of a cost or fee that is being charged.

For more information on the payment surcharge amendments and the ACCC's enforcement role, see our Focus: The ACCC will be watching you pass on the bucks.

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