This can only happen in a market that is fundamentally broken. Because the two major card companies control 80 percent of the market, they don’t have to compete on price the way restaurants do in a functioning market. As any consumer knows, if a restaurant prices its meals too high, there are several others nearby to enjoy and clearly printed prices make comparison shopping simple. But, restaurant owners and other merchants don’t have that option when it comes to credit cards. The dominant card companies together set rates for swipe fees on behalf of the banks that sponsor their cards. And the rates are nearly impossible to figure out. Currently, Visa has 60 different fee categories and MasterCard has 243.

Another clear indicator of a broken market is the fact that restaurant owners can’t negotiate swipe fees the way they can negotiate for nearly every other business expense. It’s a take it or leave it deal – either accept the fees as they are or don’t accept plastic. That’s not a real choice if you want to attract customers. And, merchants can’t even be sure that the fees they pay are correct. When a customer gives a credit card to the cashier or server, there is no way of knowing what the fee will be for that card, since the rates vary by card and by reward program.

A restaurant owner tallying receipts at the end of the day has no idea if, for a $100 meal, the credit card fee will be $2, $3, or even more. Multiply that by every restaurant check paid by credit card – more than 50 percent of the business at many restaurants – and you’re talking serious money – and serious uncertainty for the business owner. How can you manage your business if you’re not sure what your costs are on a regular basis? Should you adjust prices? Can you hire an extra server for the holiday rush? Can you pay loyal staff a little bit more?

Restaurants employ nearly 10 percent of the U.S. workforce – 12.9 million Americans at 970,000 locations across the country. But the health of this important industry is threatened by the broken market for credit card swipe fees. More and more restaurant dollars are going right out the door in windfall profits for the big banks and credit card companies instead of being used by entrepreneurial restaurant owners to keep prices down or invest in their businesses. 

Ultimately, consumers and the American economy are paying the price. Consumers pay more than they otherwise would for a restaurant meal, or other goods and services – no matter how you choose to pay. Our economy is hurt when the nearly one million restaurants – and millions of other retailers and merchants – earn less on every transaction or are forced to contemplate raising prices when their customers are watching every penny.  

The kind of price-fixing that we see with credit card fees is illegal in other parts of the economy and, frankly, it should be here. Congress took a good first step last year when it said that debit fees need to be reasonable and proportional to the actual cost of processing the transaction. Now, it’s time to look at credit card fees. We need transparency and competition to make the market work like it should, and we need a clear and predictable system so small business owners can understand what they are paying and why they are paying it.

DeFife, executive vice president for policy & government affairs for the National Restaurant Association.