Justice ministry jumps on Redecard over possible "abusive market power"

The Brazilian justice ministry's consumer affairs division SDE has started an investigation into card processor Redecard, which is controlled by Itaú Unibanco (NYSE: ITUB), over possible "abusive market power" in its relationships with certain electronic payment clients, the ministry said in a statement. SDE has found evidence of abusive and anti-competitive clauses in Redecard's contracts with the groups, including a requirement that certain clients turn over lists of their own clients to the company. The ministry began its action following a complaint from Brazilian internet commerce association Abranet on May 28, the statement said. SDE said that it had banned many of the practices mentioned in the complaint, given that they could lead to "irreparable damage to the market," and that Redecard would have 15 days to respond in its defense. Redecard said in a securities filing that it had been in constant contact with its clients in the internet payment segment and that it had worked diligently to improve the security of such payments. Moreover, the company will cooperate with authorities to explain its case, according to the statement. Redecard's shares on the Bovespa exchange closed Friday at 28.20 reais, down about 3.7% from their close the day before. "Although there's a lot of news in the market around [the question of regulation], I don't expect interventionist measures like taxes and [explicit] fee limits," Raymond James (NYSE: RJF) Latin American banking analyst Federico Rey-Marino told BNamericas. Rey-Marino said he expects a generally free market outcome from ongoing regulatory reform efforts, with more connectivity between systems, the end of exclusivity agreements, lower fees on businesses and lower rental rates on equipment. To read the full SDE complaint notice in Portuguese, go to this link