Bars and liquor stores have to compete: Why shouldn’t banks?
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The hundreds of thousands of bars and liquor stores across America know a thing or two about competition.

When it comes to buying beer, wine and spirits, customers can vote with their feet and their wallets. That’s because a well-regulated and highly competitive beverage-alcohol marketplace has ushered in more consumer choice than ever before.

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Congress brought some of this type of competition to debit cards a few years back.  Those reforms said the Visa and MasterCard networks could no longer block their competitors from trying to get business and allowed their customers, merchants, to choose which network (including smaller companies like Star, Pulse, NYCE and others) they wanted to use.

And, the reforms gave banks incentives to compete on price rather than let Visa and MasterCard price-fix their fees.  If they go with price-fixed fees, the Federal Reserve limits how high they can be. 

The reforms have started to make a real difference and help Main Street businesses and their customers.

Before these reforms were put in place, whenever a customer swiped a card, local beverage businesses were plunged into a murky backwater of price-fixing where big banks used their muscle to squash competitors and charge outrageous fees for their services.

Most people had no idea this was happening when they swiped a card to pay their bar tab, or that it was raising the price they paid for a six-pack of beer or a bottle of bourbon.

But the fact was that these “swipe fees” were hurting Main Street businesses that were trying to provide jobs and benefits to their communities.

Now, the gains that have been made in this David vs. Goliath battle could be wiped out if some in Congress have their way.

Even with the modest reforms to debit cards, banks are still marking up their debit card fees an astonishing 500 percent according to the figures the banks themselves report to the Federal Reserve.

Still, Congress did usher in badly-needed, pro-competition measures to the debit-card marketplace.

Beverage licensees, with their fellow members of America’s retail community, aren’t asking for a leg up. They want a level playing field; they want the swipe-fee market to behave the way the rest of our economy does: with competition ensuring fairness and bringing efficiency and lower prices to consumers.

And make no mistake: These problems become everyone’s problems. Swipe fees (including those on credit cards) have ballooned into many merchants’ second-largest operating cost after labor. Tighter margins for retailers mean they are forced to raise prices to at least partially cover the exorbitant cost of price-fixed swipe fees and, most critically, keep their doors open.

Congress should not even consider repealing these pro-consumer debit reforms, especially with big banks enjoying soaring profits.

That’s why hundreds of thousands of merchants, large and small from all over the country, are asking Congress not to turn the clock back.

Keeping in place swipe fee reforms signals support for a level playing field for businesses of all sizes and would continue to save consumers hundreds, if not thousands, of their hard-earned dollars annually.

Congress should protect the progress made on debit-card reform and explore other ways to increase transparency and competition to truly make the payment card market a free one.

John Bodnovich is the Executive Director of American Beverage Licensees, a national trade association representing 15,000 on- and off-premise beer, wine and spirits retailers throughout the country. 


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