Reminder for the Democrats: Break the credit card cartel

Last week, after hearing scratches on the walls and spotting mouse droppings under the kitchen sink, my girlfriend called an extermination service. The guy who introduced himself – thin, bearded, with a rural Maryland accent – seemed to know the facts about him and certainly didn’t mind talking about it. He said he likes his job – he pays better than his previous job, farmer – but he has some complaints.

First, he often encounters snakes when curious in crawl spaces and is not a fan of them (I warned him there are black rat snakes in ours). Second, he is angered by state regulators that no longer allow him to kill snakes or other creatures. “They redefined them as ‘wildlife’,” he grinned. And thirdly, after requesting payment by check instead of card, he has made a long rant against the high transaction fees that credit card companies charge small businesses. His he five-person company, he said, paid $ 26,000 in commissions last year.

As it happens, the day the exterminator came out, he held the Senate Justice Commission hearings on this issue with the scroll rate. President Dick Durbin scheduled the hearing later Visa and Mastercard, which control over 80%. in credit card transactions last month imposed a $ 1.2 billion increase in scan fees. This theft comes on top of the $ 27 billion more credit and debit card processing fees that US merchants paid in 2021 compared to 2020 (a 30 percent increase), according to one witness. Doug Kantorgeneral councilor of the National Association of Grocery Stores.

Swipe rates, Kantor explained, “go up with every dollar of inflation” and act as an “inflation multiplier,” forcing retailers to raise prices “to keep up with rising fees.” During the last two earnings claims, he added, Visa made it clear that it is “a beneficiary of inflation” and that inflation is “a good thing for us.”

The central problem, Kantor e Other witnesses said, it is a lack of competition. In theory, the thousands of credit card banks could provide lower swipe fees to merchants to get their deals, as well as offer lower interest rates and other perks to compete for consumer business. Visa and Mastercard, on the other hand, use their market power to force all banks to charge the same fees.

Furthermore, the tariff complexes required by the duopoly are higher for small businesses because the charges are partly based on volume. “Small retailers with a few dozen transactions per day pay a higher rate than national retailers with millions of transactions,” the National Retail Federation noted in a letter to the committee. “Fees are also higher for e-commerce transactions, which have become increasingly important for small retailers due to the shift to more online shopping since the start of the pandemic.”

Visa and Mastercard’s behavior appears to be a textbook violation of antitrust law. In fact, the Department of Justice and the Federal Trade Commission have filed antitrust lawsuits against the credit card giants. However, these cases have only slightly limited the market power of firms. Much more vigorous legal proceedings are underway.

Congress could help by passing legislation that requires more competition in the sliding fee market. A provision of the Dodd-Frank Act of 2010, written by Durbin himself, has increased the competition and moderate tariff increases in the debit card market, but the law did not apply to credit cards. At the hearing last week there was talk of reviewing that provision, including by the Republicans.

Cracking down credit card fees is just the kind of thing that could grab the attention of our exterminator and small business owners like him. In his case, even that might not convince him to vote Democrat. His regulation joke made us think he was a Trump type. Silent, millions some small business owners are robbed of Mastercard and Visa. They may be spurred on by signs that Democrats understand their situation and are dealing with it.

Sadly, it’s likely that virtually none of them have even heard of last week’s hearings because, apart from one story in Appeal, had no national media coverage. In the cacophony of other issues – abortion, Ukraine, gas prices – serious efforts of Democrats in Congress to move bipartisan anti-monopoly legislation across both Houses and the Biden administration to take a step forward the application of the antitrust against Monopoli Big Tech and Big Ag they are not breaking through to the public. If the party can’t dynamically change it anytime soon, it’s likely to be as messed up in the medium term as the average small business from the credit card cartel is.