Credit Card Interchange Fees: Three Decades of Antitrust Uncertainty

Abstract

This article re-examines the historical, economic, and legal analyses of credit card interchange fees, rejecting the standard assumptions that (1) collectively set interchange fees are unlikely to harm consumers and (2) these fees cannot feasibly be set in a competitive fashion. Through a new historical assessment and consideration of the most recent economic learning, this article shows that under current market conditions collusively set interchange fees are likely to harm consumers and thus violate the antitrust laws. In addition, a competitive remedy is feasible. The six largest Visa and MasterCard issuers, which are larger than the Discover Card System and thus large enough to run their own systems, could be required to set their own interchange fees. Smaller issuers in the Visa and MasterCard systems could continue to set interchange fees collectively.

Keywords: credit card, interchange fee, antitrust, collusion, price fixing, two-sided market, bank, issuer, acquirer