Merchants give Congress their take on interchange

On Oct. 1, 2007, the Merchant Payments Coalition, a group of merchant trade associations, delivered to Congress a detailed report on interchange. It was in response to questions posed by Rep. Ric Keller, R-Fla., at a hearing on July 19, 2007.

At that hearing, MPC Chairman Mallory Duncan claimed that the manner in which Visa U.S.A. and MasterCard Worldwide establish interchange rates and rules is in violation of U.S. antitrust laws. Duncan, who is also Senior Vice President and General Counsel at the National Retail Federation, said that interchange fees charged by the two top card Associations cost merchants and consumers $40 billion a year.

In response, Rep. Keller asked questions, which prompted the MPC report to Congress. The MPC alleged the following in its report:

• Visa and MasterCard keep their operating rules a secret from Congress and the public, including the retailers that use their services.

• Although by federal law Visa and MasterCard cannot prevent merchants from offering their customers discounts for paying in cash, the card networks' rules governing cash discounts are confusing, and enforcement is sometimes aggressive, making it difficult for merchants to give such discounts to customers.

• Visa and MasterCard say that merchants are permitted to negotiate with them for the lowest possible interchange rates, but in reality the rates are set by the card Associations and the issuing banks, and merchants are out of the loop.
• Despite what Visa and MasterCard might say, merchants receive no benefits from interchange fees.

• Visa and MasterCard's claims that merchants advocate price controls set by the federal government are false.

• Merchants do not have the freedom to pick which Visa and Master Card products they accept at their businesses, so they cannot disallow cards that carry high interchange rates, such as commercial cards.

At the July 19 Antitrust Task Force hearing, Duncan said Visa and MasterCard "continue to keep their illegal behavior out of the spotlight and, they hope, cut off discussion before Congress learns too much about what they have been doing. Suffice it to say that there are a broad range of legislative solutions – both within and outside this Committee's jurisdiction – that could improve on the current system."

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