Itaú Unibanco and its card-processing company Redecard have agreed to pay 21 million reais (US$5.2 million) in a settlement with Brazil's competition authority, and to cease their discriminatory practices in the payments card processing market.
In a statement issued on 4 July, Brazil's Administrative Council for Economic Defence (CADE) said it is the largest settlement fine the agency has collected involving a unilateral conduct case.
The agency opened its investigation in 2016 against Banco do Brasil, Bradesco and Cielo and Itaú Unibanco, for alleged discrimination practices on the banking services market in Brazil. CADE said the probe against the other three banks still remains open.
Its investigation found that that the "big financial institutions", most of which control card-processing companies, would refuse to read the receivables in advance for smaller processing companies.
In Brazil, businesses that accept credit cards have to wait nearly 30 days to receive the payment from the customer's bank. During the period, a shop can apply to a bank for a line of credit using its receivables, which show the pending credit card transactions and thus the money owed to the business.
The agency also said the major card-processing companies, which the big banks controlled, imposed hurdles for smaller banks to access their receivables schedule and prevented the banks from anticipating their receivables.
Itaú agreed to open up its credit card receivables services to credit card-processing companies other than its own Redecard.
CADE also found that the banks used a "lock in" tool to retain the receivables of a client and prevent them from switching to other banks. The agency said though this tool is justified and a common practice in the market, the banks applied the lock on a client even if they had no active credit operations to justify its usage.
The companies agreed to formalise the "lock" contract only in credit operations that have the receivables warranty disclaimed in a written document.
The agency also found that Itaú, which controls Redecard, made it difficult for customers to switch to another bank. The bank agreed not to retaliate against clients who wished to use other processing services, and to refrain from tying its products with those of Redecard.
Redecard also agreed not to discriminate and to charge the same percentage fee on credit card transactions to all banks. CADE found the credit card processor had charged smaller banks higher fees than it charged the banks with which Redecard was associated.
Pinheiro Neto Advogados partner Leonardo Rocha e Silva said it is a significant decision in terms of timing, as the companies settled during the initial phase of the investigation. He said CADE was able to get a financial contribution from the companies, although Brazil's competition law does not obligate them to accept the payment of the contribution to execute a settlement agreement.
Bruno de Luca Drago, a partner at Demarest Advogados, said CADE has a strong policy of entering into agreements with defendants and it was important to the agency for the banks to freeze the conduct straight away. "There was talk at the tribunal if the fine imposed was enough, but in the end they got the defendants to cease the conduct," he said.
Itaú Unibanco and Redecard did not respond to request for comment.
Counsel to Itaú Unibanco
BMA - Barbosa, Müssnich, Aragão
Partner Barbara Rosenberg in São Paulo