Wednesday, January 18, 2006

Credit Where It's Due (WSJ Commentary)

The Wall Street Journal, Jan 12, 2006 "Review & Outlook" (subscription required)

[The following "Letter to the Editor" was submitted to The Wall Street Journal by the co-editors of The Credit Card Interchange Report - in response to a Jan 12 commentary, "Credit Where It's Due"].

Dear Editor,

The Jan 12 Review & Outlook "Credit Where It's Due" chose to poke fun and mock millions of retailers and consumers with weak arguments. Could it be the WSJ is supportive of these sky-high merchant interchange fees because among your largest sources of ad revenues are the very banks which stand accused of collusion and illegal price-fixing?

This multi-billion dollar antitrust litigation against Visa, MasterCard and the banks which own the two leading credit card companies is not about the convenience they provide to merchants, but about why interchange fees in the U.S. are double the rate in Italy and other industrialized nations. It is about why Canada has a zero debit card interchange fee, as is the case with check writing in the U.S. which also enjoys no interchange fee - even though the cost and labor associated with clearing and processing non-electronic transactions is substantial.

Instead, this is about market power, not by Wal-Mart, but the banks which set these fees. When you suggest that government intervention would just cause a mess, think of the mess caused by Enron and World Com from an unbridled lack of intervention. Remember, Congress enacted antitrust protections more than one-hundred years ago to give the courts authority to remedy these practices. Now, we see giant multi-national retailers joining with "mom and pop" entrepreneurs in support of this litigation; all on the same side as consumers who are burdened with paying this $25 billion annual hidden tax.


Mitch Goldstone and Carl Berman
The Credit Card Interchange Report -