Why rollback competition now?

A successful American economy relies on open and free competition. Sometimes, competition get stifled and government must step in to break up monopolies and other anti-competitive schemes. 

Congress did this in 2010, addressing a broken market by including debit reforms in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The debit reforms, or “Durbin Amendment”, brought transparency and predictability into a pricing scheme where previously there was none; and required networks to compete for merchant business. These procompetitive reforms are working and Congress should oppose current efforts to roll them back.

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Prior to 2010, Visa and MasterCard paid large banks to sign network exclusivity contracts. Historically, debit cards had multiple enabled networks that a transaction could be routed through, each competing for merchant routing business. The exclusivity contracts only allowed one network on the card, leaving the merchant with no routing choices. As a result, Visa was able to route 79% of all debit transactions from its ten largest issuing banks. Lack of competition artificially inflated network fees and grocers had no ability to negotiate these costs.   

The 2010 law banned exclusivity agreements requiring at least two unaffiliated networks enabled on all debit cards. Networks now must compete for both bank and merchant business. Merchants are guaranteed the right to prefer one network over another, basing decisions on cost, security and reliability. Competition in the routing market has worked, costs have gone down, and reliability has improved, while making our payments system more secure by driving innovation, such as encryption and tokenization. 

Repealing such an important law would return payments systems to an anticompetitive and potentially less secure market at a crucial time. In the first six months of 2016, debit accounted for over 60% of electronic transactions, or 27 billion individual purchases.

Instead of debating the repeal of a successful law, Congress should address current market practices of the two largest networks. Merchants and banks have seen new fees proposed or enacted to ensure network routing dominance. The card brands’ operating rules have resulted in the launch of confusing screens at the point of sale asking a customer to choose Visa debit or US Debit when a merchant migrates to EMV. These screens inhibit the merchant’s legal right to route transactions and cause customer confusion, benefiting no one. Merchants view these as attempts to subvert the debit reform law competition requirements returning us to the previously broken system.

It is Congress’ job to ensure competition and foster innovation. The debit reform law of 2010 was a critical step in the right direction. The American economy needs more competition and innovation in our payments system, not less. 

Jennifer Hatcher is senior vice president of government and public affairs for the Food Marketing Institute.


The views expressed by authors are their own and not the views of The Hill.