MasterCard Opposes Sen. Durbin's Interchange Bill

Both merchants and consumers benefit from the ability to use and accept electronic payments, and in today’s free market system, each pays a share of the cost of the service. The benefits and the cost of card payment services are now shared between merchants and consumers but the merchants behind the Durbin and Conyers’ bills seek to retain the benefits while shifting the cost to consumers.

Sen. Durbin’s legislation, S. 1212, would give merchants a special exemption from antitrust laws enabling them to engage in anticompetitive and collusive behavior to cut the cost of the many benefits merchants receive from card acceptance, and shift the cost to consumers. Furthermore, if the collusive and anticompetitive activity permitted under S. 1212 does not achieve the merchants’ objectives, they can ask a specially created government price control board to force a greater cost shift away from merchants, ultimately to consumers.

This bill, like legislation recently introduced in the House by Rep. John Conyers (D-MI), is part of an organized merchant campaign that will result in shifting merchants’ card acceptance costs to consumers. Neither bill requires merchants to pass any savings to consumers if merchants are successful in reducing their costs under either bill. Not only will consumers not share in the merchants’ increased profits under S. 1212, but experience demonstrates that consumers lose when merchants no longer pay their fair share for the valuable benefits they receive from accepting payment cards.

This is precisely what happened in Australia when the government reduced interchange fees. Although the government intervention cut costs for merchants, many Australian consumers now pay more for their payment cards and receive less in return as a result. Furthermore, there is no evidence that merchants reduced prices for consumers as a result of the government’s intervention.

A wide array of organizations from non-profits to community banks and credit unions to minority small businesses have voiced their opposition to legislation giving merchants a special exemption from antitrust laws when establishing the prices and terms applicable to accepting payment cards. The Department of Justice also expressed concerns, indicating that the antitrust exemption “would appear to be the type of naked collusion that the antitrust laws condemn as per se unlawful because such conduct lacks plausible benefits to competition.”