Request for Public Comment on Revisions Regarding Tying Restrictions - District Notice 00-10 - Dallas

Federal Reserve Bank Of Dallas

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Federal Reserve Bank
ll★K
of Dallas
DALLAS, TEXAS
February 17, 2000 75265-5906
Notice 2000-10
TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Request for Public Comment on
Revisions Regarding Tying Restrictions
DETAILS
The Board of Governors of the Federal Reserve System has requested public com-
ment on a proposed exception to the anti-tying restrictions of section 106 of the Bank Holding
Company Act Amendments of 1970 and the Board’s Regulation Y. The proposed amendment
would establish a “safe harbor” permitting a bank to offer a credit card that can be used to make
purchases from a retailer affiliated with the bank.
The Board must receive comments by March 13, 2000. Please address comments to
Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street
and Constitution Avenue, N.W., Washington, DC 20551. All comments should refer to Docket
No. R-1060.
AT TACHMENT
A copy of the Board’s notice as it appears on pages 6924–25, Vol. 65, No. 29 of the
Federal Register dated February 11, 2000, is attached.
MORE INFORMATION
For more information, please contact Jane Anne Schmoker, Legal Department, at
[phone]. For additional copies of this Bank’s notice, contact the Public Affairs Department
at [phone] or access our web site at http://www.dallasfed.org/banking/notices/index.html.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office [phone]; El Paso Branch Intrastate [phone], Interstate [phone];
Houston Branch Intrastate [phone], Interstate [phone]; San Antonio Branch Intrastate [phone].6924 Federal Register/Vol. 65, No. 29/Friday, February 11, 2000/Proposed Rules
Section 106 contains an explicitpublic comment on a proposed
exception to the anti-tying restrictions exception (the ‘‘statutory traditional
of section 106 of the Bank Holding bank product exception’’) that permits a
Company Act Amendments of 1970 and bank to tie a product or service to a
the Board’s Regulation Y. The proposed loan, discount, deposit, or trust service
amendment would establish a ‘‘safe (‘‘a traditional bank product’’) offered by
harbor’’ permitting a bank to offer a that bank. The Board has extended this
credit card that can be used to make exception by providing that a bank may
purchases from a retailer affiliated with condition the availability of, or vary the
the bank. consideration for, any product or service
DATES: Comments must be received by on the condition that the customer
March 13, 2000. obtain a traditional bank product from
an affiliate of the bank (the ‘‘regulatoryADDRESSES: Comments should refer to
1traditional bank product exception’’).Docket No. R–1060, and may be mailed
The Board adopted the regulatoryto Ms. Jennifer J. Johnson, Secretary,
traditional bank product exception in itsBoard of Governors of the Federal
present form because inter-affiliateReserve System, 20th Street and
Constitution Avenue, NW, Washington, transactions do not appear to pose any
DC 20551. Comments also may be greater risk of anti-competitive behavior
delivered to Room B–2222 of the Eccles than intra-bank transactions, and
Building between 8:45 a.m. and 5:15 because Congress had extended the
p.m. weekdays or delivered to the guard statutory traditional bank product
station in the Eccles Building Courtyard exception to cover inter-affiliate
on 20th Street, NW (between transactions for savings associations and
2Constitution Avenue and C Street, NW) their affiliates.
at any time. All comments received at Section 106 authorizes the Board to
the above address will be available for grant exceptions to its restrictions by
inspection and copying by any member
regulation or order. On December 7,
of the public in the Freedom of
1999, the General Counsel of the Board
Information Office, Room MP–500 of the
issued a legal interpretation indicating
Martin Building, between 9:00 a.m. and
the Board’s view that section 106 does
5:00 p.m. weekdays, except as provided
not prohibit a credit card bank from
in § 261.14 of the Board’s Rules
issuing a credit card that may be usedRegarding the Availability of
to make purchases from a retailerInformation (12 CFR 261.14).
affiliated with the credit card bank
FOR FURTHER INFORMATION CONTACT: 3(‘‘private-label credit card’’). The
Scott G. Alvarez, Associate General Interpretation did not address the
Counsel (202/452–3583), or Andrew S. situation where a bank or its retailer
Baer, Attorney (202/452–2246), Legal affiliate offer discounts on their
Division. Users of Telecommunication respective products in connection with
Device for Deaf (TTD) only, contact a private-label credit card arrangement,
Diane Jenkins at (202) 452–3544. as that situation was not presented by
SUPPLEMENTARY INFORMATION: the request for an interpretation. The
proposed exception also does not coverBackground
that situation.
Section 106(b) of the Bank Holding
Proposed RuleCompany Act Amendments of 1970 (12
U.S.C. 1972) generally prohibits a bank The Board is proposing to use its
from tying the availability or price of a statutory authority to grant a regulatory
product or service to the purchase by a exemption to section 106 for private-
customer of another product or service
label credit cards that may be used at aoffered by the bank or any of its
retailer affiliated with the issuing bank.affiliates. A bank engages in a tie for
The Board is proposing the exception inpurposes of section 106 by conditioning
FEDERAL RESERVE SYSTEM order to disseminate the Board’s view,the availability of, or offering a discount
as reflected in the Interpretation, thaton, one product or service (the ‘‘tying12 CFR Part 225 such arrangements are not as a generalproduct’’) on the condition that the
matter anticompetitive, and to create a[Regulation Y; Docket No. R–1060] customer obtain some additional
rule of more general applicability notproduct or service (the ‘‘tied product’’)
Revisions Regarding Tying limited to the facts on which thefrom the bank or from any of its
Restrictions Interpretation was based.affiliates. Violations of section 106 can
be addressed by the Board through anAGENCY: Board of Governors of the
enforcement action, by the DepartmentFederal Reserve System.
of Justice through a request for an
ACTION: Notice of proposed rulemaking.
injunction, or by a customer or other
SUMMARY: The Board of Governors of the party through an action for damages. 12
Federal Reserve System is seeking U.S.C. 1972, 1973, and 1975.
VerDate 27<JAN>2000 16:06 Feb 10, 2000 Jkt 190000 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\11FEP1.SGM pfrm08 PsN: 11FEP1Federal Register/Vol. 65, No. 29/Friday, February 11, 2000/Proposed Rules 6925
Applicability of Section 106 For these reasons, the Board is PART 225—BANK HOLDING
proposing to establish, through a COMPANIES AND CHANGE IN BANK
Because section 106 prohibits a bank regulatory exception, a safe harbor for CONTROL (REGULATION Y)
from offering or discounting a product private-label credit card arrangements
1. The authority citation for part 225or service on the condition that the where such cards may only be used to
continues to read as follows:customer obtain some additional make purchases from a retailer affiliate
product or service from the bank or from Authority: 12 U.S.C. 1817(j)(13), 1818,of the issuing bank. The proposed safe
any of its affiliates, the question arose as 1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),harbor is consistent with the concerns of
to whether a private-label credit card 1972(1), 3106, 3108, 3310, 3331–3351, 3907,
section 106 about anticompetitive and 3909.arrangement violates that restriction
behavior. The proposal requires that thewhen credit is extended only when a 2. In § 225.7, a new paragraph (b)(4)products or services be available for
customer makes a purchase from a is added to read as follows:purchase at the same price by meansretailer affiliated with the issuing bank.
other than the private-label credit card, § 225.7 Exceptions to tying restrictions.Although the extension of credit
such as cash or credit cards issued bythrough the private-label credit card is (b) * * *
a third party. Furthermore, the issuingnot conditioned on any particular (4) Safe harbor for retailer-affiliated
bank may not discount the credit itproduct being purchased, or on credit card banks. Issue credit cards that
offers through the private-label creditpurchases being made from any may be used to purchase products or
card to customers who use the card toparticular retailer, the lack of a network services from a retailer affiliated with
make purchases at the bank’s retailerwith other retailers limits the ability of the bank, if:
affiliate. Because a customer could (i) The products or services may bethe customer to access that credit other
purchased from the retailer affiliatethan by purchasing a product or service purchase any product or service from
using other payment methods, includingfrom the affiliated retailer. In the the retailer for the same price, regardless
credit cards issued by other banks;private-label credit card arrangement of the payment method, the only
(ii) The bank does n