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The Battle in Ruling Interchange Fees for Card Payments: What does Europe Learn from Australia and the US?

Safari Kasiyanto

Some empirical studies have demonstrated that interchange fees (IFs) of card payments are necessary to stimulus innovation in retail payments. However, some others show that recent IFs have been set up too high by network owners so it causes more burden to the retailers and harmful to the consumers. Retailers in many countries then begin to file lawsuits against the card networks, arguing that the IFs policy has violated competition laws by creating price-fixing and entry barriers to the card industry. Public authorities have also been recalled to solve this issue. They mainly appear in two forms: competition law enforcement and regulation. In the EU, the competition commission has decided to prohibit the application of IFs as for it violates competition law and brings harm to the consumers. This decision has been affirmed by the general court and the network owners are now appealing against this decision. However, far before EU, Australia and the US had the same experiences in dealing with IFs. As results of long process, Australia has had regulation since 2003 to reduce IFs and allow retailers to surcharge credit card transactions. So has the US with the Durbin amendment, capping the IFs for debit card transactions. However, many studies argue that instead of benefitting to the consumers these policies are harmful. Banks start to charge consumers more fees in return to the income losses from the cut of IFs while retailers have tendency to surcharge the consumers more than the cost the retailers actually bear. Using legal qualitative method, this paper attempts to seek the reasons why EU seems fail to take the experiences of Australia and the US into consideration before deciding that IFs are harmful. It firstly employs comparative law approaches to compare each country experience and then use law and economics approaches for the rest analysis.

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