No Need for Price Control Legislation or an Antitrust Exemption to Lower Costs WASHINGTON, May 15
WASHINGTON, May 15 /PRNewswire/ -- Merchants do not need price control
legislation or an antitrust exemption to lower costs for payment card
acceptance, as they already have real opportunities to negotiate fees, said
Joshua Peirez, Chief Payment System Integrity Officer at MasterCard Worldwide.
Even though this is a basic commercial dispute, merchant lobbyists appear to
be casting aside existing opportunities to negotiate in favor of congressional
intervention in the form of price control legislation, he said.
Peirez said, "merchants are an essential part of our system and we are
deeply committed to addressing their needs." MasterCard responded to merchant
concerns about the transparency of our system by publishing its rules and all
of its default U.S. interchange rates online. In July 2004, MasterCard
published on its Website, without restriction, every rule that merchants and
their acquirers must follow. Later, at the request of merchants, it posted the
chargeback rules. Now, in response to merchant requests, MasterCard will make
all of its operating rules available to merchants.
"The publication of MasterCard's rules and default interchange rates was
designed to enhance the merchants ability to negotiate prices and the terms of
MasterCard acceptance," he told the Committee, explaining that merchants are
given a significant amount of valuable information that gives them the ability
to negotiate with the hundreds of acquiring banks that compete for merchant
business to get the best rates and terms they can. "It's not clear why they
have not used this information to their advantage," he said.
In November 2006, MasterCard also responded to merchant concerns about
rising gasoline prices by establishing a cap on interchange rates that kicks
in at about $50. "We expected gasoline retailers to use this information to
negotiate lower merchant discount rates and to point to our initiative to
lower fees from our competitors. We have been disappointed to learn, however,
that most gasoline merchants have not taken advantage of this opportunity,"
Peirez said.
With all the opportunities that exist to negotiate the cost of accepting
payment cards, the antitrust exemption for industry negotiations proposed in
H.R. 5546 is not necessary. Nor do we believe there is reason to allow these
negotiations to occur outside the standard protections of anti-trust law,
Peirez said. He pointed out that the Anti-Trust Modernization Commission, in
which two of the merchant representatives participated, stated antitrust
exemptions can harm the U.S. economy and consumers.
In today's economic environment, an artificial reduction in interchange
would exacerbate the growing credit crunch, as issuers could both limit the
availability of credit and raise fees on payment cards. This would have a
disproportionate impact on low and moderate income consumers. In Australia,
where the government mandated an artificial reduction in interchange fees,
consumers are now paying significantly higher fees for their payment cards and
have had benefits reduced. There is no evidence that merchants have lowered
their prices to reflect the lower fees they are paying for payment card
acceptance.
Peirez also noted that the merchants are seeking legislation claiming
existing antitrust law is inadequate, while they are also pursuing,
simultaneously, litigation on these same issues. He noted that all parties in
that litigation have agreed to mediation, which began last month. If
resolution is achieved through mediation, it will resolve the litigation and
all the issues raised in this bill.
Peirez also addressed the clear inaccuracies that have become part of the
rhetoric generated in the debate over interchange:
-- Merchant lobbyists say MasterCard makes it difficult or impossible for
merchants to discount for cash. This is simply not true. MasterCard
rules simply and clearly state that: "A merchant may provide a discount
to its customers for cash payments." Our rules impose no restriction
on how a merchant offers a cash discount.
-- Merchant lobbyists also state that they cannot disclose what they pay
for payment card acceptance. MasterCard has no rule restricting any
merchant from disclosing, to its customers, its merchant discount fees,
or the interchange component of that fee.
-- Merchant lobbyists are also claiming that MasterCard has a rule that
requires a merchant that accepts MasterCard to accept it at every
retail location, referring to it as a "single entity rule." There is
no such rule. A merchant that would like to accept MasterCard at one
of its several locations is free to do so.
Contacts:
Sharon Gamsin, MasterCard Worldwide, 914-249-5622, sgamsin@mastercard.com
Eric Hoffman, Weber Shandwick, 202-585-2808, ehoffman@webershandwick.com
SOURCE MasterCard Worldwide
