Judge rejects $30 billion Visa, Mastercard swipe-fee settlement – The Washington Post
Doug Kantor, general counsel of the National Association of Convenience Stores joins Tony Katz Today to discuss.
Doug Kantor
This case is about how Visa and MasterCard both form banks that give everybody credit cards into pricing cartels. And those pricing cartels drive up the cost of everything we buy every day. But we don’t know it. These fees are hidden. They end up baked into the prices that we all pay. It’s a major inflation driver. So, the cases have challenged that and said, hey, that’s not right. They shouldn’t be able to do that. We don’t like it when OPEC or anybody else forms pricing cartels. Why should we let Visa and MasterCard and the major credit card banks do that? … There was this settlement that the lawyers in the case came up with, and it didn’t deal with any of those problems… It had a tiny little reduction, but there were these giant loopholes that said, well, the fees the banks charge will go down a little bit, but Visa and MasterCard can raise their own fees. So, it doesn’t matter in the end. So this, this luckily the judge saw through that,
Tony Katz:
This whole idea about, “you could lower it here and raise it here.” This is long been part of the credit card processing problem that people could say, ohh, your fees are very low for a card, swipe right every time you swipe a card and for the transaction fee, but they might increase a fee somewhere else. That’s sometimes dealing with somebody who’s being unscrupulous in terms of the sale. Your argument has been that the actual rates that Visa – MasterCard charges, they force banks to charge, or they you’re making almost the argument that they collude with the banks to charge as opposed to banks being able to engage in real competition. Is that the argument you’re making?
Doug Kantor:
That’s exactly right. They put out a schedule and say, banks, here’s what you’re going to charge. And all the banks say, oh, that’s great, we don’t have to compete with each other on price. Of course, we love that. If you did that in any industry, prices would skyrocket. That’s why we have antitrust laws in the first place. But because we don’t see it right in front of us every day, they’ve been able to get away with it for decades now. And the prices are staggering. We’re almost eight times higher than what they pay for it. Exactly the same thing in Europe, for example, but you can look anywhere around the world, we’re higher. Guaranteed.
Tony asks:
Let me push back on that idea. No one said you had to take credit cards except cash, except Bitcoin. Why should Visa MasterCard have to allow A level of competition if you could just take other forms of payment?
Doug Kantor:
Here’s the problem with that is these credit cards are so ubiquitous around the country. Everybody uses them every day. Now, people do take cash, but a lot of people don’t carry cash. Look, we’ve heard arguments like this before, right? We used to, with respect to phone service, say. Hey, AT&T, having all the phone service monopolized is a problem. They could have and did say at the time, “Hey, you don’t have to have a telephone.” Well, come on, that’s not realistic. That’s not any more realistic than saying you can’t take credit cards because otherwise customers are just going to go somewhere else, and it takes advantage of the fact. That part of the economy so competitive, it doesn’t work. It breaks down because one of them can’t say, oh, I, I won’t take the cards anymore. They’ll lose out to the guy down the street.
Tony Katz:
Now I want to go back to something you said in in this interview and you said it in print as well. This is the quote from you that made me say we had to have a conversation. The use of the word cartels, you’re utilizing the term purposefully. Can you explain why?
Doug Kantor:
Well, I’m using it purposely for two reasons. One, because it’s accurate. That is the very definition of a cartel is they put all these guys together and say you have to take every single person’s card like it’s from the same company or none of them. And putting competitors together. That is the very definition of cartel. And obviously I use it because. It carries other overtones for people and they understand, ohh, wait, cartels are bad, we don’t like those. There’s a problem. It gets people to notice what Visa and MasterCard like to keep hidden, which is that they have these gigantic fees. Just to give you a sense, the average American family pays $1,100. More every year because of these fees. That’s a big number to just secretly be siphoned out of your pocket. So, you have to use some explicit language to tell people, hey, something you don’t see is taking this money from you.
Tony asks:
Clearly Visa and MasterCard have an argument to make saying, “Hey, we provide this service, we can get paid for the service.” What do you say to them getting paid?
Doug Kantor:
So look, everybody’s going to get paid no matter what you do here. One thing we’ve pointed to is there’s bipartisan legislation in Congress that says, hey, just have two network options on the credit card, just like we have on debit cards today. Then there’s a little bit of competition and let’s see what happens. Doesn’t specify what the rates end up being, just means there’s a little bit of competition…
Source: Ricardo Mendoza Garbayo / Getty
There’s a dozen other networks out there. We see them on ATM’s, we see them on our debit cards, right? There’s Pulse, there’s Star, there’s Shazam. These aren’t household names like these and MasterCard, but they’ve created their own networks. They do exactly the same thing. They safely complete transactions. Millions and millions of dollars every day that come out of our bank accounts. Why should they be barred by the two cartels that say no because Visa, MasterCard are big and all the banks have agreed to work with them. You can’t do credit cards. Well, that doesn’t make any sense. They should be able to compete. Let them do it.
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