In a recent piece for the Financial Times, Brendan Greeley argues that the misnamed Credit Card Competition Act would reduce inflation. In it, Greeley recycles numerous myths about the nature of credit-card markets that have long been rebutted by serious economic research. Both theory and ample evidence from the United States and other countries shows that attempting artificially to force down interchange fees is bad for consumers—especially those with lower incomes and those who revolve their balances. Moreover, these interventions simply redistribute the costs of operating the payment-card system; they do not eliminate them. As a result, they won’t reduce inflation, as Greeley imagines.

Read the full piece here.

QUESTION PRESENTED

Whether the court should overrule Chevron v. Natural Resources Defense Council, or at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.

INTEREST OF AMICI CURIAE

The Manhattan Institute for Policy Research (“MI”) is a nonpartisan public policy research foundation whose mission is to develop and disseminate new ideas that foster greater economic choice and individual responsibility. To that end, MI has historically worked sponsored scholarship and filed briefs supporting economic freedom against government overreach.

Richard Epstein is the Laurence A. Tisch Professor of Law at New York University. He also serves as the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution and the James Parker Hall Distinguished Service Professor of Law emeritus and a senior lecturer at the University of Chicago.

Todd Zywicki is George Mason University Foundation Professor of Law at George Mason University Antonin Scalia School of Law and a research fellow of the GMU Law and Economics Center.

Justin “Gus” Hurwitz is a senior fellow and academic director of the Center for Technology, Innovation, and Competition at the University of Pennsylvania Carey Law School.

Geoffrey Manne is the president and founder of the International Center for Law and Economics and a distinguished fellow at Northwestern University’s Center on Law, Business, and Economics.

This case interests amici because it involves an agency regulation that was not explicitly authorized by statute. Indeed, it gives the Court a chance to revisit Chevron—either overruling it or clarifying that statutory silence does not require judicial deference.

SUMMARY OF ARGUMENT

Family-run fishing businesses face a fraught and competitive environment even before the intrusion of burdensome regulations. Here, the National Marine Fisheries Service (“NMFS”) promulgated a rule for certain classes of herring boats that sweeps in most such businesses, as portrayed in the Oscar-winning movie CODA. If a vessel needs a monitor and has not already been assigned one under a federally funded program, it must pay for one itself. The cost for most herring boats exceeds $710 per sea day.

Petitioners, four family-owned and -operated fishing companies, contend that the industry-funding requirement which is not explicitly authorized by statute—will have a devastating economic impact on the herring fleet and will disproportionately impact small businesses, destroying historic communities.

The district court ruled for the government, finding that various provisions of the Magnuson-Stevens Fishery Conservation and Management Act (“MSA”) together conferred broad authority on the NMFS to implement regulations to carry out fishery management plan’s measures. Without any analysis, the court also found that, even if the statute were ambiguous, the government’s reading would be reasonable under Chevron Step Two and thus worthy of judicial deference. A divided panel of the D.C. Circuit affirmed, reasoning that the MSA’s authorization for the placement of monitors, through silence on funding, left room for agency discretion. This Court granted certiorari to determine whether the Court should overrule Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), or at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.

The Court should now take this opportunity to overhaul the Chevron-deference regime, because this experiment in rebalancing the relationship between administration and judicial review has failed. It has led to agency overreach, haphazard practical results, and the diminution of Congress. Although intended to empower Congress by limiting the role of courts, Chevron has instead empowered agencies to aggrandize their own powers to the greatest extent plausible under their operative statutes, and often beyond. Congress has proved unequal to the task of responding to this pervasive agency overreach and now has less of a role in policymaking than in the pre-Chevron era. Courts, in turn, have become sloppy and lazy in interpreting statutes. It’s a vicious cycle of legislative buckpassing and judicial deference to executive overreach.

Chevron deference rests on the presumption that Congress won’t over-delegate and that agencies will be loyal agents. But the past 40 years have shown that Congress loves passing the buck and agencies are actually principals who pursue their own interests. The time has more than come for the Court to revisit Chevron, whether it chooses to overrule it explicitly or keep it nominally under a newly restricted standard. Cf. Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (preserving Auer deference but reworking it so completely that both Chief Justice Roberts, who joined Justice Kagan’s majority opinion, and Justice Kavanaugh, who joined Justice Gorsuch’s effective dissent, noted that there wasn’t much difference between the two).

Democratic lawmakers like Illinois Sen. Dick Durbin and the Justice Department’s Antitrust Division want to impose new rules for credit-card transactions that would reduce competition, harm consumers and crush small banks.

The traditional Boy Scout oath was that each scout should “do his duty.” Unfortunately, in the bankruptcy case dealing with the fallout from the horrendous sexual abuse scandal, the bankruptcy court failed to do its duty. Instead of looking out for those who were victimized, the case has turned into another feeding frenzy by class action lawyers. To rectify this miscarriage of justice, appeals courts should take a second look.

Read the full piece here.

Chairman Hickenlooper, Ranking Member Blackburn, and Members of the Committee:

I am Todd Zywicki and it is a pleasure to appear before you today to testify on the topic of “Protecting Consumers from Junk Fees.” I am George Mason University Foundation Professor at Antonin Scalia Law School and Research Fellow of the Law & Economics Center. From 2020-2021 I served as the Chair of the CFPB’s Taskforce on Consumer Financial Law and from 2003-2004 I served as the Director of the Office of Policy Planning at the Federal Trade Commission. I am also co-author of Consumer Credit and the American Economy (Oxford 2014) and have written and spoken extensively on issues of consumer protection generally and consumer financial protection specifically. I appear voluntarily today in my personal capacity and do not speak on behalf or represent any other party.

I share the frustration that many consumers hold today regarding the proliferation of seemingly ubiquitous add-on fees that we experience constantly, from surcharges for using our credit cards at a merchant, to hotel “resort fees,” and others. And earlier this year I experienced exactly this frustration when I checked into a hotel on vacation and was assessed a mandatory $30 a day “resort fee” that was only disclosed in fine print on the last screen of a multi-page checkout process at an Internet hotel booking website.

Buying a ticket to concert has in fact become a tedious process of searching for a concert or sports ticket and then having to spend 10 minutes clicking through multiple pages before you can discover the real price and decide whether to go to the show.

So I also say, “Enough.”

But it is also important to stress that not all of these fees are “junk” fees. Many of these multi-part pricing schemes are economically efficient, in that they better match consumers with the product terms and attributes they value. Others are appropriate as means to protect some consumers from being forced to subsidize others’ choices or the higher costs that some consumers impose relative to others. For example, requiring upper-income jet-setters to pay foreign currency transaction fees hardly seems unfair to those who don’t travel abroad and presumably nobody has an issue with requiring payment of “add on” fees for additional toppings on a pizza. Requiring every vacation resort to be all-inclusive would force those who don’t drink alcohol to subsidize those who do. While some use of multi-part pricing today is likely welfare-reducing, multi-part pricing has become more frequent is because paying for the services you actually use over the long run can be more fair and efficient for other consumers, even if foreign travelers, partiers, and those who pay late on their credit cards might disagree.

As Howard Beales and I wrote recently:

The term “junk fees” defies easy definition. But it is imperative to distinguish ‘junk fees’ that are designed to extract rents and consumer surplus from consumers from efficient behavior-based fees. Welfare-reducing “junk” fees are most likely to emerge only under a relatively narrow set of market conditions — particularly those markets with few repeat customers where consumers are less likely to learn of the hidden fees, where consumers are effectively locked-in and unable to avoid paying the fee when it is imposed, or where such fees may be atypical and thus consumers are not alert to them.

The unraveling of the rule of law in finance is inherent in the system’s discretionary process of regulation. Each financial crisis begets new regulations and new regulatory agencies with more expansive and discretionary powers. The general entanglement of finance, leftist interest groups, and the federal regulatory apparatus has created a threat to freedom that is almost unique in history. Leftist activists, “woke” corporations, and regulators and politicians have recognized and acted on the opportunity to use the financial regulatory system both to enact preferred policies through anti-democratic means and to silence their ideological opponents. As governmental power grows, the threat of its misuse grows concomitantly.

ICLE Academic Affiliate Todd Zywicki joined Southwest Public Policy Institute President Patrick M. Brenner on SPPI’s SPPI-TV podcast to discuss interest rate caps and the role of the Consumer Financial Protection Bureau (CFPB). Video of the full episode is embedded below.

Abstract

The notion of “junk” fees is a fine piece of rhetoric, but useless as an analytical tool. Many fees identified as junk impose costs on consumers who generate those costs – rather than forcing others to subsidize their behavior. For example, credit card late fees deter late payments and their associated costs while only world travelers pay foreign currency transaction fees. There is no reason for ordinary consumers to subsidize either group. Because information is costly, consumers rationally focus on the elements of price that are most important in their own circumstances. Requirements to disclose everything everywhere will only interfere with this process. Both the structure of pricing, and the level of prices, should be determined by competition in the marketplace. As we observe, the result is detailed fee structures for some products and services, and bundled pricing for others. Attempts to regulate pricing structures by requiring itemized prices increased the costs of real estate settlements. Regulating components of credit card pricing structures led to increases in other fees and reductions in credit availability. Competition over pricing structures is far more likely to satisfy consumer preferences than an inevitably overbroad set of regulatory requirements