OPINION:
Todd Zywicki and Joshua Wright’s claims (“Durbin’s Antitrust Fantasies,” June 18, 2010) about the payment card market and economic theory are incorrect. MasterCard and Visa compete for card issuers, not for consumers or merchants. Competition for issuers does not result in consumer benefit because issuers are not price competitive. They retain interchange revenue rather than passing it along to consumers via lower card prices or greater rewards. Retailers are generally more price competitive than card issuers, so they are more likely to pass along the savings from lower interchange fees to consumers.
Zywicki and Wright also refuse to address clear evidence of an uncompetitive market: This year Visa raised its debit interchange fees by as much as 40 percent without suffering any loss of market share. Consumers saw no additional benefits; debit rewards programs have actually been scaled back. The debit interchange market is broken; the Durbin amendment will fix it.
Finally, it’s worth noting that Zywicki and Wright’s employer, George Mason University, has announced it will no longer accept Visa for tuition payments because interchange rates are too high.
ADAM J. LEVITIN
Associate Professor of Law
Georgetown University Law Center
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