maybe only to a credit card geek…
The Commerce Commission has settled everything in its prosecution of Visa and MasterCard and all the banks in their capacity as members of those networks. It (the Commission) incurred costs of $6.6m over the three years it spent preparing for the trial which has now been aborted. Multiply that by about 8 to take account of all the defendants and you have a bill of about $50m.
And on the benefit side? Well there are 3 main points. First, interchange is still set centrally (which was the basic competition complaint – the thing that made this look like a cartel) but now by offshore profit-seeking networks (Visa and MC have both demutualised in recent years), rather than by local committees with good information on competition and market conditions in NZ. These cental interchange fees are unlikely to fall and may well rise over time IMHO. So no gain there.
Second, banks can negotiate bilaterally and the Commission has extracted “committments” from the banks that involve
significantly reducing the average interchange fees charged on New Zealand credit card transactions, ensuring that these fees in New Zealand are driven downwards from the rates that were centrally set by the Visa and MasterCard schemes
These sound very much like behavioural undertakings, so I wonder if this is a precedent to the use of such undertakings in other areas, such as merger clearance applications. In any case, logic suggests that if there is a maximum price that card issuers can charge for interchange, they will do that. Will be very interesting to see if there are deviations. Personally I’m sceptical of any real gains from this.
Third, merchants are allowed to “surcharge” meaning they increase the price when you present a credit card. Again, I don’t see much change. Those who can already do (eg taxis) and I’d expect retailers to be quite careful about where and when they surcharge, for fear of annoying their customers or driving into the arms of rivals who do not surcharge.
So overall, this case has been a disaster: huge expense for very modest gains at best.