No, that is called a cartel provided that they are organizing to fix prices. There are already laws for that. Also, I’m not buying Chad’s arguement that Visa and MC are the only games in town, or that they behave like a monopoly. His reasoning leaves out American Express and a lot the retail credit cards and store credit accounts - there are available alternatives. The major credit cards are not behaving like a monopoly or cartel unless they have significantly raised their rates in collusion.
So far, I’m hearing that some do not like being charged a fee for services. Or, perhaps they feel that the fee is excessive (usually 3-4% of the transaction) and they are being “screwed.” I get it - they want something for nothing. These people know there is not enough evidence to support criminal anti-trust prosecution of the largest financial institutions. So, their answer is to have the government decide what fees are allowed and make it more “fair.” Welcome to France - enjoy living under democratic socialism.
Show me an alternative. AMEX and Discover are noise in the data.
Visa and MC fees, rates, rules, and regulations are basically the same and follow in pretty much lock-step. Visa raises interchange? MC does the same shortly thereafter.
To be a “monopoly” does not mean that there are not alternatives. It means that the “monopoly” controls such a large segment of the market that they are pretty much immune to the minimal amount of competition out there. That is Visa/MC. Visa/MC are not in the least bit threatened by AMEX or Discover and they don’t behave as if they were.
A merchant in today’s day and age, in order to conduct business, must take Visa/MC. The exceptions are few and far between and are generally small boutique or exotic or curmudgeonly run businesses.
A merchant in today’s day and age need not take AMEX or Discover.
ETA:
You find lots of merchants who don’t take AMEX or who don’t take Discover or who don’t take both of those. You find VERY few that don’t take Visa/MC but do take AMEX or Discover. Costco is one example but they are a specialty club that has made special deals with AMEX and offers their own AMEX as a “store” card and they have a VERY powerful draw and set of “fanboys” who just deal with it. And Costco STILL takes PIN-debit cards so those who have no AMEX but a PIN-Debit card (including Visa/MC can still shop there). SEARS is a good example. SEARS used to own the Discover Card and its network (NOVUS at the time – may still be). SEARS only took Discover for a while. No Visa/MC. That policy came to a screeching halt after they say the money they were leaving behind.
If you had retail experience dealing with them, you might understand what I am saying.
His reasoning leaves out American Express and a lot the retail credit cards and store credit accounts - there are available alternatives.
It does not leave those out. I specifically mentioned AMEX. They (non Visa/MC including AMEX/Discover and store brand cards) are insignificant and play no meaningful role in the market (on the merchant side).
And as a merchant, store brand cards are only effective for the particular store that is running them. Small business does not run their own store brand credit card. So that basically only leaves AMEX and Discover as the alternative. A business that only takes AMEX and Discover won’t get very far in today’s world. “Everyone” has a Visa or MC or both (credit or signature debit). Not everyone has an AMEX or Discover.
The major credit cards are not behaving like a monopoly or cartel unless they have significantly raised their rates in collusion.
They are and do behave as such, whether intentionally colluding or gentlemanly looking the other way collusion, the effect is the same.
So far, I’m hearing that some do not like being charged a fee for services. Or, perhaps they feel that the fee is excessive (usually 3-4% of the transaction) and they are being “screwed.” I get it - they want something for nothing.
No. You are hearing wrong. Merchants want a service provided that is proportional to the fees charged. The service provided is much much less than the fees charged. I sell a $1000 item to someone. The “service” provided by Visa and the partner bank that issued the card is not worth $20-$40 in fees in terms of what it cost them to provide the service (+ proportional profit). Their cost for that is the same cost as provided when the item is $10 and the fees are $0.50 (rate is the same but the per transaction fee fixed fee [yes there are usually both] on small dollar transactions can greatly affect the actual rate where on large dollar transactions the same fixed fee is noise).
No merchant out there is saying they want the service without paying a fee for it. They are not saying they want something for nothing.
These people know there is not enough evidence to support criminal anti-trust prosecution of the largest financial institutions. So, their answer is to have the government decide what fees are allowed and make it more “fair.” Welcome to France - enjoy living under democratic socialism.
I am not claiming the answer is the government setting the fees.
I am just explaining what the problem is and that there is no real market solution due to the two-tentacled “monopoly” of Visa/MC controlling payment processing systems.
Acutally, lack of a viable alternative is required for a monopoly. For example, many cities have only one cable provider, but this is not a monopoly because comparable services are provided by satellite, internet, etc. Also, in 2009 AMEX reported 24% of the total dollar volume of CC transactions in the US. This was the largest of any single card issuer. While I do not have 2010 data, this not the drop in the bucket that you claim. In addition, I’ve still not seen where the major CC instituitions have colluded to raise rates.
Check. We have that. There is no viable alternative for a merchant to Visa/MC “monopoly”. I already pointed out that with the exception of Costco (I don’t know of others), pretty much all merchants ALL take Visa/MC. No merchant (with Costco excepted) takes only AMEX or Discover or those two together.
For example, many cities have only one cable provider, but this is not a monopoly because comparable services are provided by satellite, internet, etc. Also, in 2009 AMEX reported 24% of the total dollar volume of CC transactions in the US. This was the largest of any single card issuer.
First of all, “card issuer” is irrelevant. Visa/MC don’t issue ANY cards. They are all issued through their partner banks.
Second, that is DOLLAR amount. AMEX average charge is much higher than Visa/MC average charge I believe. What percentage of actual transactions did AMEX have? Much lower I am guessing.
While I do not have 2010 data, this not the drop in the bucket that you claim. In addition, I’ve still not seen where the major CC instituitions have colluded to raise rates.
The behavior is such that it is irrelevant if they collude or just behave as if they do collude (i.e., act in lock-step with one another). The fact is, you pretty much, as a merchant, cannot get a straight Visa or a straight MC account. (I am sure some very large retailers could work around this, maybe) You get a combined Visa/MC account. It comes as a package when you get CC processing. AMEX and Discover are separate add ons.
So you have a functioning “monopoly” in a two-tentacled beast in Visa/MC, whether or not it is a legal monopoly. The effect is, on purpose, the same. The rules they have set up (they = Visa/MC) pretty much have allowed them to become the de facto payment standard in the modern world with no meaningful competition. (meaningful meaning that a merchant could rely on the competition alone)
What don’t you get about this? I have explained it from the merchant side multiple times.
I don’t get your logic for using the term monopoly. The fact the vast majority of merchants accept Visa or MC does not create a monopoly. If you could show me where they manipulate the market to the exclusion of other agencies (AMEX or Discover) or forms of payment (cash, store credit, money order, checks, etc.), I might agree that its a oligopoly.
Try reading it again. It night become more clear. Look at the points where I point out that merchants today basically have to take Visa/MC in order to do business. Just taking Discover or AMEX or both of those alone is a road to failure.
Notice also that “monopoly” is in “” marks, meaning, it may not be a legal monopoly, but it operates or has the effect on the market as if it were a monopoly. And also note that the two together form a single monster (hence “mono”, walking in lock step, and as a merchant, you automatically get both together. Read all that again.
Also recall that Microsoft was deemed a monopoly by the courts despite the existence of “competition” from Apple, Linux, OS/2, etc.
Visa/MC have a de-facto “monopoly” as a two-tentacled monster today in controlling payment systems. AMEX and Discover are insignificant and do not represent credible competition. A merchant can easily do business without taking AMEX or Discover, but cannot survive for long only taking AMEX or Discover (noted the Costco exception, which has turned AMEX into their store card and has other distinguishing features that separate it out), and pretty much has to take Visa/MC.
The “association” rules for merchants have been carefully crafted to reach this position of control in payment systems and Visa and MC have basically the same rulebook, policies, rates, etc.
I am speaking of someone who has been a merchant since 1996 accepting credit cards and signature debit cards.