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Justice Dept. opposed to interchange bill
WASHINGTON (7/7/08)—The U.S. Department of Justice last week voiced its opposition to a bill, the Credit Card Fair Fee Act (H.R. 5546), which would give a government-appointed tribunal power to set credit and debit card interchange rates. In a letter to Rep. Lamar Smith (R-Texas), who sought the department’s views, Principal Deputy Assistant Attorney General Keith Nelson wrote that H.R. 5546 “creates a broad immunity under the antitrust laws” for merchants and issuers jointly to negotiate interchange fees and terms of access to a credit and debit card network above a certain size. “The antitrust laws are the chief legal protector of the free-market principles on which the American economy is based. Companies free from competitive pressures have incentives to raise prices, reduce output, and limit investments in expansion and innovation to the detriment of the American consumer,” Nelson wrote. Nelson also warned that bill seeks to counter “perceived market power on the part of large credit card networks” by shifting power to merchants negotiating with those networks. “It would do this by exempting from the antitrust laws joint negotiations of merchants with any network electronic payment system that has been used for at least 20% of the combined dollar value of U.S. credit, signature-based debit, and PIN-based debit card payments. “From a policy perspective, the Department does not support legislatively establishing a buy-side monopoly (or monopsony) to counteract any existing market power,” the Justice letter said. It added that such a result also could increase harm to competition and consumers. The Credit Union National Association (CUNA) also opposes statutory and rulemaking changes that would regulate interchange fees as such action would adversely affect consumer options, competition and technological innovation. CUNA maintains that interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. To read more points made by the Justice Department letter use the resource link below.

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