Federal Trade Commission aims to provide merchants more choice in debit-payment networks
A Federal Trade Commission order adopted Tuesday compels Mastercard to provide customer information to competing networks and to stop blocking merchants from using the alternative networks to process debit-card payments, the commission said Wednesday.
By allowing choice in the marketplace, the FTC order is expected to lead to more competition in payment networks and lower swipe fees over a period of time.
The FTC’s action follows Canada’s decision in May to reduce swipe fees by 27%, effective this fall. The FTC order is similar in concept to the Credit Card Competition Act legislation proposed last year by Sen. Dick Durbin (D-Illinois).
The FTC said Mastercard allegedly had prevented merchants from routing debit-card payments through alternative networks in violation of the Dodd-Frank Act’s Durbin Amendment and Regulation II, which require banks to enable at least two unaffiliated payment networks on every debit card to provide choice in the payments marketplace. Lack of competition can result in higher transaction fees. Swipe fees were at the center of the lawsuit called In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, which dates back to 2005.
Blocking Tactics Banned
The FTC order, which followed a public comment period, prohibits Mastercard from blocking merchants’ use of competing debit-card networks.
Mastercard also must submit compliance reports in 60 days and annually for the next 9 years on the anniversary date of the order. The order is set to terminate in 10 years.
Federal Antitrust Laws
Several federal laws protect the process of competition for the benefit of consumers, allowing strong incentives for businesses to operate efficiently and to keep prices down and quality up, according to the FTC’s website.
The Sherman Act is a federal criminal law outlawing monopolies and other forms of unreasonable restraint of trade and conspiracy to control a market. It imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison, the FTC’s website says.
The FTC’s Bureau of Competition is tasked with enforcing the nation’s antitrust laws, which are at the foundation of the United States’ free market economy. To promote the interests of consumers, “they support unfettered markets and result in lower prices and more choices,” according to the FTC’s website.