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Card payment systems and competition concerns: multilateral interchange fees and no-discrimination rules, a necessary evil?

Card payment systems and competition concerns: multilateral interchange fees and no-discrimination rules, a necessary evil?
Card payment systems and competition concerns: multilateral interchange fees and no-discrimination rules, a necessary evil?
Purpose - to explore the competition issues arising from credit card payment systems under European Commission (EC) rules and suggest possible regulatory approaches.

Design/methodology/approach - the central role of credit cards in the modern economy is discussed from the viewpoint of the current methods of regulation through the no-discrimination rules (NDRs) and multilateral interchange fees (MIFs). Emphasizes the antitrust assessment of MIFs which takes account of comparative elements arising from the US market and briefly considers NDRs in order to emphasize their possible link with MIFs. Discusses the consequences of a possible abolition of MIFs in conjunction with alternative regulatory frameworks.

Findings - while it is true that both MIFs and NDRs represent blatant restriction on competition, economists have striven to emphasize the peculiar aspects of four-party payment networks as two-sided markets where, within such markets, competitive forces operate in a sui generis way to render MIFs and NDRs essential for the correct functioning of card payment networks. Concludes that the time is arguably ripe for a reassessment of the antitrust implications of MIFs and NDRs and empirical evidence appears to demonstrate both their anti-competitiveness and their non-essential nature for the functioning of card payment networks. Suggests that alternatives, such as bilateral negotiations between the members of card payment systems, could represent a feasible and more competition-friendly way to recover transaction costs for the members of a four-party card payment scheme.

Originality/value - clarifies some of the competition issues associated with the regulatory framework for credit card transactions in the European Union (EU).
0021-9460
688-715
Lista, Andrea
f573cd28-b4d6-4a73-8dad-00341fb9e877
Lista, Andrea
f573cd28-b4d6-4a73-8dad-00341fb9e877

Lista, Andrea (2008) Card payment systems and competition concerns: multilateral interchange fees and no-discrimination rules, a necessary evil? Journal of Business Law, 7, 688-715.

Record type: Article

Abstract

Purpose - to explore the competition issues arising from credit card payment systems under European Commission (EC) rules and suggest possible regulatory approaches.

Design/methodology/approach - the central role of credit cards in the modern economy is discussed from the viewpoint of the current methods of regulation through the no-discrimination rules (NDRs) and multilateral interchange fees (MIFs). Emphasizes the antitrust assessment of MIFs which takes account of comparative elements arising from the US market and briefly considers NDRs in order to emphasize their possible link with MIFs. Discusses the consequences of a possible abolition of MIFs in conjunction with alternative regulatory frameworks.

Findings - while it is true that both MIFs and NDRs represent blatant restriction on competition, economists have striven to emphasize the peculiar aspects of four-party payment networks as two-sided markets where, within such markets, competitive forces operate in a sui generis way to render MIFs and NDRs essential for the correct functioning of card payment networks. Concludes that the time is arguably ripe for a reassessment of the antitrust implications of MIFs and NDRs and empirical evidence appears to demonstrate both their anti-competitiveness and their non-essential nature for the functioning of card payment networks. Suggests that alternatives, such as bilateral negotiations between the members of card payment systems, could represent a feasible and more competition-friendly way to recover transaction costs for the members of a four-party card payment scheme.

Originality/value - clarifies some of the competition issues associated with the regulatory framework for credit card transactions in the European Union (EU).

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Published date: 2008
Organisations: Southampton Law School, Law

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Local EPrints ID: 80520
URI: http://eprints.soton.ac.uk/id/eprint/80520
ISSN: 0021-9460
PURE UUID: 2dccae4a-824a-4c9e-a896-1e141cd6f6c0
ORCID for Andrea Lista: ORCID iD orcid.org/0000-0002-4234-0914

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Date deposited: 25 Mar 2010
Last modified: 14 Mar 2024 02:27

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Author: Andrea Lista ORCID iD

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