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July 19, 2006

Small Businesses Offer Senate Testimony Against MasterCard and Visa Over Interchange Fees
Merchant association representatives went head-to-head with MasterCard and Visa representatives today at a Senate Judiciary Committee hearing that asked the question "Credit Card Interchange Rates: Antitrust Concerns?" While merchants accused MasterCard and Visa of secretly colluding to fix prices at ever-higher levels, the credit card companies said the dispute was a business disagreement, and that antitrust does not come into play when merchants have many other options to accept customer payments.

Testimony included that of Kathy Miller, owner of the Elmore Store in tiny Elmore, Vermont, who said that growing interchange fees are making it more and more difficult to run her business profitably. Representatives from MasterCard and Visa said there is no price fixing and that interchange rates come from the individual card issuers, not directly from MasterCard and Visa. Joshua Peirez of MasterCard testified that there is an inconsistency in MasterCard and Visa being singled out for antitrust concerns when American Express is known to charge higher rates on average than MasterCard or Visa issuers.

Interchange fees are those fees that merchants pay in order to accept and process customers' credit card transactions. According to today's testimony from Visa General Counsel Joshua Floum, those fees currently average about 2.2% of each credit card transaction.

Vermont Senator Patrick Leahy, the Senate Judiciary Committee's Ranking Member, acknowledged the arguments of both sides in the dispute. Leahy noted that the European Union’s Competition Authority has warned Visa and MasterCard that unless they change their interchange fees in Europe, they will face an antitrust action. Whether Congress will take any action concerning this dispute in this country is still unknown.

Full testimony from today's hearing is available at the Senate Judiciary Committee Web site.

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