Program to attract foreign visitors is an economic benefit to the US and should be reauthorized
We won’t get fooled again by retailers’ empty promises
Last week The Hill ran a piece by Merchant Payments Coalition Chairman and National Retail Federation SVP Mallory Duncan, in which he asked Congress to adopt a European model of price fixing and give big box retailers a multibillion handout at the expense of American consumers.
For those who have been following the payments industry for the past decade, his demand for government price fixing of credit interchange rates - the fee that merchants pay to accept credit cards -- will come as no surprise. What makes this demand so remarkable is the fact that it blatantly ignores the failures of these policies in the U.S. and around the world.
In the US, Sen. Durbin (D-Ill.) already tried this with debit cards. He pushed through a dark-of-night amendment that regulated fees and gave big box retailers an $8 billion annual handout, based on the false promise that merchants would pass those savings on to consumers. From the beginning, critics of the law (including consumers) accurately predicted that retailers would pocket these savings instead. Four years later, the evidence of the consequences of the law continues to pile up.
In October of 2015, Phoenix Marketing International conducted a survey of nearly 2,000 consumers which found that the vast majority of shoppers are not experiencing a price decrease at the point-of-sale. In each of the 15 categories measured in the survey, at least 92 percent of shoppers reported that prices have increased or remained the same over the past year.
Furthermore, a study by the Federal Reserve Bank of Richmond (the entity charged with implementing this defective law) found that the amendment is not working as Congress intended.
The failings of price fixing can be found abroad as well. In Australia, price fixing caused consumer fees to increase by $480 million, while retailers there walked away with $850 million a year in handouts. In the UK where rates were recently capped, there is no evidence that savings are being passed on to consumers and customers are already seeing rewards programs slashed as issuers try to make up for lost revenue.
Not only is Duncan pushing a policy that has failed the world over, but he is asking Congress to wade into a business negotiation that has already been resolved in the courts. In 2013, after over a decade of court-monitored negotiations, merchants, card issuers and networks reached a $6 billion dollar settlement regarding credit interchange fees. The deal included a cash payout, as well as rule changes that give merchants new ways to negotiate acceptance costs and the ability to pass costs on to consumers with checkout fees. And yet, in spite of all of these new options, merchants have chosen to go to Congress to ask for more money instead of engaging in honest negotiations.
Over the past decade it's become clear that retailer trade associations are willing to "promise" almost anything when it comes to advocating for price fixing while conveniently ignoring any and all evidence that points to how it harms consumers. This campaign advocating for the US to adopt failed European policies should be seen for what it is - an effort by big box retailers to further pad their pockets, because apparently the $32 billion that they have pocketed from the Durbin amendment wasn't enough.
Wilkinson is executive director at the Electronic Payments Coalition.