Merchant Collusion as an Antitrust Remedy
In my first post I discussed the potential for interchange legislation from a consumer protection perspective, that is, would the combination of disclosure requirements coupled with a reduction of interchange fees be likely to improve consumer welfare. I concluded that from the consumer protection perspective, the case for interchange legislation was weak. I noted that a highly likely consequence of a direct or indirect reduction in interchange would result in an increase in the cost of credit to consumers (higher finance charges, other fees, annual fees) or a reduction of consumer benefits (loyalty and rewards programs). The significant risk of a reduction of consumer access to credit, especially given the tenuous state of the economic recovery and the critical role of consumer spending in generating economic expansion and jobs, imposes a significant risk of consumer and social losses without strong evidence of offsetting consumer protection value. However, consumer protection is not the only possible defense of such legislation. This post will focus on defense of interchange legislation from a competition policy perspective.