The Economic Benefits of Credit Card Merchant Restraints: A Response to Adam Levitin

Abstract:     
Adam Levitin's article, "Priceless?: The Economic Costs of Credit Card Merchant Restraints," 55 UCLA L. Rev. 1321 (2008), argues that credit card systems violate the U.S. antitrust laws by prohibiting merchants from surcharging credit card transactions and refusing to accept high-priced reward cards. If merchants could engage in these practices, Levitin contends, they would effectively combat credit card system market power and drive down acceptance fees.

In this Essay, Steven Semeraro criticizes Levitin's proposal, arguing that surcharging and selective refusal would be ineffective tools in the fight against anticompetitive credit card acceptance fees, because merchants are unlikely to increase their prices by the amount necessary to counteract anticompetitive overcharges without also stifling efficient card use.

Number of Pages in PDF File: 14

Keywords: credit cards, antitrust, merchant restraints, credit card fees, acceptance fees, credit card surcharges, reward cards, vertical agreements, joint venture rules, anticompetitive overcharges

JEL Classification: K10, K21

Accepted Paper Series