The era of antitrust violations by the big card companies isnt over yet; but at least it is starting to crumble.
There is more work for courts, regulators and legislators to do in order to bring price competition to a market that has been stunted by the lack of it for decades. Its high time that happened.
Amex hopes to persuade a judge to overturn a ruling that will help bring a little competition to the credit-card market and benefit merchants, consumers and the entire economy. Amex likes things just the way they are because its rules bar merchants from giving customers discounts to use cards that are cheaper for the merchant to accept.
Its as if youre Coke and you get to order all the grocers who sell Coke not to sell other soft drinks for anything less than Coke costs or you wont give them any more Coke to sell. Thats not a free market. And as a consumer, youd certainly be unhappy because without competition, prices will only go up.
Merchants are not happy with these kinds of terms. People who sell groceries or gas or shoes often subsist on miniscule profit margins. When American Express has rules that distort the market so prices can only rise, merchants can end up paying fees higher than their profits.
And that means consumers pay more, even if they dont use a credit card. Stores are paying so much in card fees that they cant expand or hire new people. The economy, of which consumer spending is such a huge part, languishes.
Most businesses (those with products that actually compete on price) beg merchants to have sales. They want customers to see how well their products compete on price in order to drive business.
Making the card business more like the rest of our free-market system is going to take a while, but this is an important step in the right direction. Now the system hurts consumers with higher prices, and hurts small merchants whose second-largest operating cost on average is these swipe fees. It also keeps retailers from expanding which hurts the entire economy.
Lyle Beckwith is senior vice president of government relations for the National Association of Convenience Stores.