Evans on How Proposed EU Payments Legislation Will Restrain Competition

By David S. Evans on October 1, 2014

The European Commission’s proposed payments card legislation and the common position reached by the European Parliament in April 2014 will harm competition, innovation, and consumers if broadly endorsed by the European Council in the coming months. The interchange fee price caps will soften competition between MasterCard and Visa, the global four-party bankcard systems, and disadvantage domestic card systems. The limits on what, in effect, merchants pay for cards will shift billions of euros of costs to European consumers. The infirmity of the legislation is particularly apparent from its treatment of the three-party card schemes. These three-party schemes, which have small shares of payment cards in European countries, provide an important source of competition. The proposed legislation impairs the ability of these smaller three-party systems to compete by permitting merchants to surcharge cards from the smaller three-party systems but not the larger four-party ones, and by potentially prohibiting three-party systems from only entering into select partnerships. They may also face arbitrary price caps. These anti-competitive restrictions on small rivals, advanced in the name of competition, demonstrate the lack of serious analysis behind the proposed legislation. For European consumers the proposed payments legislation will lead to a hefty price tag, diminished choice, and depressed innovation.

Read How The Proposed Payments Legislation Will Restrain Competition Among Payment Card Schemes And Harm Consumers In The European Union