79–006 

110TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 110–913 

CREDIT CARD FAIR FEE ACT OF 2008 

OCTOBER 3, 2008.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. CONYERS, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS AND DISSENTING VIEWS 

[To accompany H.R. 5546] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to whom was referred the bill 

(H.R. 5546) to amend the antitrust laws to ensure competitive market-based rates and terms for merchants’ access to electronic payment systems, having considered the same, reports favorably thereon with an amendment and recommends that the bill as amended 

do pass. 

CONTENTS 

Page 

The Amendment ...................................................................................................... 2 

Purpose and Summary ............................................................................................ 4 

Background and Need for the Legislation ............................................................. 5 

Hearings ................................................................................................................... 10 

Committee Consideration ........................................................................................ 11 

Committee Votes ...................................................................................................... 11 

Committee Oversight Findings ............................................................................... 13 

New Budget Authority and Tax Expenditures ...................................................... 13 

Congressional Budget Office Cost Estimate .......................................................... 13 

Performance Goals and Objectives ......................................................................... 16 

Constitutional Authority Statement ...................................................................... 16 

Advisory on Earmarks ............................................................................................. 16 

Section-by-Section Analysis .................................................................................... 16 

Additional Views ...................................................................................................... 19 

Dissenting Views ..................................................................................................... 27 


jbell on PROD1PC69 with REPORTS
2 

THE AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Credit Card Fair Fee Act of 2008’’. 

SEC. 2. LIMITED ANTITRUST IMMUNITY FOR THE NEGOTIATION AND DETERMINATION OF 

RATES AND TERMS FOR ACCESS TO COVERED ELECTRONIC PAYMENT SYSTEMS. 

(a) DEFINITIONS.—For purposes of this Act: 

(1) ‘‘Access agreement’’ means an agreement giving a merchant permission to 

access a covered electronic payment system to accept credit cards and/or debit 

cards from consumers for payment for goods and services as well as to receive 

payment for such goods and services, conditioned solely upon the merchant complying with the rates and terms specified in the agreement. 

(2) ‘‘Acquirer’’ means a financial institution that provides services allowing 

merchants to access an electronic payment system to accept credit cards and/ 

or debit cards for payment, but does not include independent third party processors that may act as the acquirer’s agent in processing general-purpose credit 

or debit card transactions. 

(3) ‘‘Antitrust Division’’ means the Antitrust Division of the U.S. Department 

of Justice. 

(4) ‘‘Antitrust laws’’ has the meaning given it in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12(a)), except that such term includes section 

5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent such section 

5 applies to unfair methods of competition as well as any similar State law. 

(5) ‘‘Credit card’’ means any general-purpose card or other device issued or 

approved for use by a financial institution allowing the cardholder to obtain 

goods or services on credit on terms specified by that financial institution. 

(6) ‘‘Covered electronic payment system’’ means an electronic payment system 

that has been used for at least 20 percent of the combined dollar value of U.S. 

credit card, signature-based debit card, and PIN-based debit card payments 

processed in the applicable calendar year immediately preceding the year in 

which the conduct in question occurs. 

(7) ‘‘Debit card’’ means any general-purpose card or other device issued or approved for use by a financial institution for use in debiting a cardholder’s account for the purpose of that cardholder obtaining goods or services, whether 

authorization is signature-based or PIN-based. 

(8) ‘‘Electronic payment system’’ means the proprietary services and infrastructure that route information and data to facilitate transaction authorization, clearance, and settlement that merchants must access in order to accept 

a specific brand of general-purpose credit cards and/or debit cards as payment 

for goods and services. 

(9) ‘‘Financial institution’’ has the same meaning as in section 603(t) of the 

Fair Credit Reporting Act. 

(10) ‘‘Issuer’’ means a financial institution that issues credit cards and/or 

debit cards or approves the use of other devices for use in an electronic payment 

system, but does not include independent third party processors that may act 

as the issuer’s agent in processing general-purpose credit card or debit card 

transactions. 

(11) ‘‘Market power’’ means the ability profitably to raise prices above those 

that would be charged in a perfectly competitive market. 

(12) ‘‘Merchant’’ means any person who accepts credit cards and/or debit cards 

in payment for goods or services that they provide. 

(13) ‘‘Negotiating party’’ means 1 or more providers of a covered electronic 

payment system or 1 or more merchants who have access to or who are seeking 

access to that covered electronic payment system, as the case may be, and who 

are in the process of negotiating or who have executed a voluntarily negotiated 

access agreement that is still in effect. 

(14) ‘‘Person’’ has the meaning given it in subsection (a) of the first section 

of the Clayton Act (15 U.S.C. 12(a)). 

(15) ‘‘Provider’’ means any person who owns, operates, controls, serves as an 

issuer for, or serves as an acquirer for a covered electronic payment system. 

(16) ‘‘State’’ has the meaning given it in section 4G(2) of the Clayton Act (15 

U.S.C. 15g(2)). 

(17) ‘‘Terms’’ means all rules applicable either to providers of a single covered 

electronic payment system or to merchants, and that are required in order to 


jbell on PROD1PC69 with REPORTS
3 

provide or access that covered electronic payment system for processing credit 

card and/or debit card transactions. 

(18) ‘‘Voluntarily negotiated access agreement’’ means an executed agreement 

voluntarily negotiated between 1 or more providers of a single covered electronic 

payment system and 1 or more merchants that sets the rates and terms pursuant to which the 1 or more merchants can access that covered electronic payment system to accept credit cards and/or debit cards from consumers for payment of goods and services, and receive payment for such goods and services. 

(b) LIMITED ANTITRUST IMMUNITY FOR NEGOTIATION OF ACCESS RATES AND TERMS

TO COVERED ELECTRONIC PAYMENT SYSTEMS.—(1) Except as provided in paragraph 

(2) and notwithstanding any provision of the antitrust laws, in negotiating access 

rates and terms any providers of a single covered electronic payment system and 

any merchants may jointly negotiate and agree upon the rates and terms for access 

to the covered electronic payment system, including through the use of common 

agents that represent either providers of a single covered electronic payment system 

or merchants on a non-exclusive basis. Any providers of a single covered electronic 

payment system also may jointly determine the proportionate division among themselves of paid access fees. 

(2) Notwithstanding any other provision of this Act, the immunity otherwise applicable under paragraph (1) shall not apply to a provider of a single covered electronic payment system, or to a merchant, during any period in which such provider, 

or such merchant, is engaged in any unlawful boycott. 

(c) NONDISCRIMINATION.—For any given covered electronic payment system, the 

rates and terms of a voluntarily negotiated access agreement reached under the authority of this section shall be the same for all merchants, regardless of merchant 

category or volume of transactions (either in number or dollar value) generated. For 

any given covered electronic payment system, the rates and terms of a voluntarily 

negotiated access agreement reached under the authority of this section shall be the 

same for all participating providers, regardless of provider category or volume of 

transactions (either in number or dollar value) generated. 

(d) FACILITATION OF NEGOTIATION.— 

(1) SCHEDULE.—Within one month following enactment of this Act, the negotiating parties shall file with the Antitrust Division a schedule for negotiations. 

If the negotiating parties do not file such a schedule within one month from the 

date of enactment, the Antitrust Division shall issue such a schedule and inform the negotiating parties of the schedule. In either case, the Antitrust Division shall make the schedule available to all negotiating parties. 

(2) INITIAL DISCLOSURE.—Within one month following enactment of this Act, 

the persons described in this subsection shall make the initial disclosures described in paragraphs (3), (4), and (5) to facilitate negotiations under the limited 

antitrust immunity provided for by this section. 

(3) ISSUERS, ACQUIRERS, AND OWNERS.—Any person who is 1 of the 10 largest 

issuers for a covered electronic payment system in terms of number of cards 

issued, any person who is 1 of the 10 largest acquirers for a covered electronic 

payment system in terms of number of merchants served, and any person who 

operates or controls a covered electronic payment system shall produce to the 

Antitrust Division and to all negotiating parties— 

(A) an itemized list of the costs necessary to provide the covered electronic payment system that were incurred by the person during the most 

recent full calendar year before the initiation of the negotiation; and 

(B) any access agreement between that person and 1 or more merchants 

with regard to that covered electronic payment system. 

(4) MERCHANTS.—Any person who is 1 of the 10 largest merchants using the 

covered electronic payment system, determined based on dollar amount of 

transactions made with the covered electronic payment system, shall produce to 

the Antitrust Division and to all negotiating parties— 

(A) an itemized list of the costs necessary to access an electronic payment 

system during the most recent full calendar year prior to the initiation of 

the proceeding; and 

(B) any access agreement between that person and 1 or more providers 

with regard to that covered electronic payment system. 

(5) DISAGREEMENT.—Any disagreement regarding whether a person is required to make an initial disclosure under this clause, or the contents of such 

a disclosure, shall be resolved by the Antitrust Division. 

(6) ATTENDANCE OF ANTITRUST DIVISION.—A representative of the Antitrust 

Division shall attend all negotiation sessions conducted under the authority of 

this section. 

(e) TRANSPARENCY OF VOLUNTARILY NEGOTIATED ACCESS AGREEMENTS.— 


jbell on PROD1PC69 with REPORTS
4 

(1) VOLUNTARILY NEGOTIATED ACCESS AGREEMENTS BETWEEN NEGOTIATING

PARTIES.—A voluntarily negotiated access agreement may be executed at any 

time between 1 or more providers of a covered electronic payment system and 

1 or more merchants. 

(2) FILING AGREEMENTS WITH THE ANTITRUST DIVISION.—The negotiating parties shall jointly file with the Antitrust Division a clear intelligible copy of— 

(A) any voluntarily negotiated access agreement that affects any market 

in the United States or elsewhere; 

(B) the various components of the interchange fee; 

(C) a description of how access fees that merchants pay are allocated 

among financial institutions and how they are spent; 

(D) whether a variation in fees exists among card types; 

(E) any documentation relating to a voluntarily negotiated access agreement evidencing any consideration being given or any marketing or promotional agreements between the negotiating parties; 

(F) a comparison of interchange rates in current use in the 10 foreign 

countries having the highest volume of credit card transactions with the 

interchange rates charged in the United States under such agreement; and 

(G) any amendments to that voluntarily negotiated access agreement or 

documentation. 

(3) TIMING AND AVAILABILITY OF FILINGS.—The negotiating parties to any voluntarily negotiated access agreement executed after the date of enactment of 

this Act shall jointly file the voluntarily negotiated access agreement, and any 

documentation or amendments described in paragraph (2), with the Antitrust 

Division not later than 30 days after the date of execution of the voluntarily 

negotiated access agreement or amendment or after the creation of the documentation. The Antitrust Division shall make publicly available any voluntarily 

negotiated access agreement, amendment, or accompanying documentation filed 

under this paragraph. 

(f) REPORT TO CONGRESS BY THE ANTITRUST DIVISION.—Within seven months after 

the date of enactment of this Act, the Antitrust Division shall transmit to the House 

Committee on the Judiciary and the Senate Committee on the Judiciary a report 

on the negotiations conducted under the authority of this section during the first 

six months after the date of enactment and, if a voluntarily negotiated agreement 

is reached, whether such access rates and terms will have an adverse effect on competition and how such rates compare with access rates and terms in current use in 

other countries. Such report shall contain a chronology of the negotiations, an assessment of whether the parties have negotiated in good faith, an assessment of the 

quality of the data provided by the parties in their initial disclosures, a description 

of any voluntarily negotiated agreements reached during the negotiations, and any 

recommendations of the Antitrust Division concerning how Congress should respond 

to the conduct of the negotiations. 

(g) EFFECT ON PENDING LAWSUITS.—Nothing in this section shall affect liability 

in any action pending on the date of enactment of this section. 

SEC. 3. OPT-OUT. 

Nothing in this Act shall limit the ability of acquirers or issuers that are regulated by the National Credit Union Administration or that, together with affiliates, 

have assets of less than $1,000,000,000, to opt out of negotiations under this Act. 

SEC. 4. CARDHOLDER SAVINGS. 

Any agreements reached pursuant to the authority provided in section 2 shall provide that— 

(1) when any fees that a merchant is charged for access to a covered electronic payment system are reduced pursuant to any such agreement, the merchant shall pass the benefits of any such reduction in fees on to its customers 

or employees; and 

(2) when any fees that a financial institution collects for access to a covered 

electronic payment system are increased pursuant to any such agreement, the 

financial institution shall pass the benefits of any such increase in fees on to 

its customers or employees. 

SEC. 5. EFFECTIVE DATE. 

This Act shall take effect on the date of the enactment of this Act. 

PURPOSE AND SUMMARY

The purpose of H.R. 5546, the ‘‘Credit Card Fair Fee Act of 

2008,’’ is to correct an imbalance that currently exists between 


jbell on PROD1PC69 with REPORTS
5 

1 U.S. GOV’T ACCOUNTABILITY OFFICE, CREDIT CARDS, INCREASED COMPLEXITY IN RATES AND

FEES HEIGHTENS NEED FOR MORE EFFECTIVE DISCLOSURES TO CONSUMERS 9 (Sept. 2006); see also The Secret History of the Credit Card (PBS television broadcast Nov. 23, 2004), http:// 

www.pbs.org/wgbh/pages/frontline/shows/credit/view/. 2 Id; see also Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore, 2004: Recent Changes 

in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances, THE

FED. RESERVE BD. (2004) available at http://www.federalreserve.gov/pubs/oss/oss2/2004/ 

bull0206.pdf; CAROLYN B. MALONEY, FOREVER IN DEBT: ANTI-COMPETITIVE CREDIT CARD PRAC- TICES AND THEIR IMPACT ON THE ECONOMY (2008), available at http://maloney.house.gov/documents/financial/creditcards/20080730CreditCardFINALPub.pdf. 3 Credit Card Interchange Fees: Hearing Before the Task Force on Competition Policy and Antitrust Laws of the H. Comm. on the Judiciary, 110th Cong. (2007). 4Original cosponsors of H.R. 5546 include Reps. Boozman (R-AR), Carney (D-PA), Delahunt 

(D-MA), Gohmert (R- TX), Hall (R-TX), Lofgren (D-CA), Peterson (R-PA), Platts (R-PA), Shuster 

(R-PA), Sullivan (R-OK), Weiner (D-NY), Welch (D-VT), and Wilson (R-SC). There are currently 

44 cosponsors total. 

credit card companies on one side and merchants and consumers 

on the other. The bill does this by giving a limited antitrust exemption to merchants so they can negotiate with the credit card companies for interchange fee rates and rules. H.R. 5546 also helps to ensure that consumers receive the benefits of the exemption by mandating that any savings resulting from the bill be passed on by 

whoever receives the benefit, whether it be the merchants or the 

credit card companies. 

BACKGROUND AND NEED FOR THE LEGISLATION

The credit card industry is a highly profitable business, with 

more than 691 million credit cards in circulation in the United 

States, accounting for $1.8 trillion of consumer spending.1 The 

credit card companies’ annual earnings are in the $40 billion range, 

and about half of all Americans reportedly carry a balance on their 

high interest rate credit cards. In addition, every time any credit 

card is used a merchant pays an ‘‘interchange fee.’’ 2

The Judiciary Committee’s Task Force on Competition Policy and 

Antitrust Laws has held two hearings on this issue. At the first 

hearing, conducted in July of last year, concerns were expressed 

that the large credit card companies could charge excessive interchange fees because of market power; that retailers have little ability to negotiate the fees; and that there is a lack of transparency 

with regard to how the credit card companies calculate their fees.3

After the hearing, Chairman John Conyers Jr. (D-MI) and Representative Chris Cannon (R-UT) introduced H.R. 5546, the ‘‘Credit 

Card Fair Fee Act of 2008.’’ 4 The second hearing, conducted in May 

of this year, focused on the legislation, which created a limited 

antitrust immunity for negotiating voluntary agreements and, if 

necessary, participating in market-based proceedings before a 

panel of Electronic Payment System Judges to determine the appropriate interchange fee. 

CREDIT CARD INTERCHANGE FEES

What is an Interchange Fee? 

Credit card interchange fees are fees charged when a consumer 

uses any payment card at a retailer. The fees cover the cost of processing the transaction, fraud protection, billing statements, payment system innovations, and other expenses. The interchange fee 

serves as payment from the merchant’s bank—the acquirer—to the 

cardholder’s bank—the issuer—for the underwriting, funding, and 

billing of the merchant’s customer. 


jbell on PROD1PC69 with REPORTS
6 

5Press Release, Merchants Payment Coalition, Merchants Say that Visa Fee Cut is Less Than 

Meets the Eye (Jun. 27, 2008) (on file with The Merchants Payments Coalition (MPC), Unfair 

Credit Card Fees), http://www.unfaircreditcardfees.com/site/page/about. 6The payment card industry asserts interchange fees are already naturally constrained, because if the fees are too high, the merchants will not accept payment cards and will opt for competing forms of payment, such as cash and checks, or new forms of payment, including PayPal, 

Debitman, and Google Checkout. 7The other major competitor is American Express, which, unlike Visa and MasterCard, functions as a closed-loop network. Known as a ‘‘three-party’’ system, it includes cardholders, merchants and a single financial institution that offers proprietary network services. Thus, American Express issues the cards, signs up merchants to accept the cards, and performs the functions necessary to complete the transactions. In this case, the merchant discount is paid in full 

to the payment card company. The ‘‘four-party’’ system includes cardholders, merchants, card 

issuing banks, and merchant acquiring banks, using the services of a multiparty network such 

as Visa or MasterCard. 

The fee is a percentage established by the payment card company, such as Visa or MasterCard, and is the most significant portion of a ‘‘merchant’s discount rate.’’ This discount rate is the subject of an agreement between the merchant and his or her bank, 

and represents the total amount deducted by the merchant’s bank 

from each card transaction. Ultimately, the merchant discount rate 

is divided three ways among the consumer’s bank, the merchant’s 

bank, and the credit card company. Most of these financial institutions are members of Visa, MasterCard, or both. 

In the United States, the interchange fee averages approximately 

1.75% and the merchant discount rate averages 2.20% of card 

transactions. In 2007, interchange fees totaled approximately $42 

billion.5

In recent years, the merchant discount rate and interchange fee 

have become highly controversial, and the subject of regulatory and 

antitrust investigations as well as several lawsuits. Merchants and 

consumer groups insist that interchange fees in the United States 

are not in line with economies of scale, such as decreasing technology costs, as well as similar lower fees charged in other countries. They maintain that rising interchange fees are resulting in 

higher prices, lower profits, and a burden on the consumer. 

The payment card industry, however, warns that a substantially 

greater harm to consumers will result if interchange fees are artificially lowered. They claim that if the fees are too low, consumers 

will ultimately suffer, because payment card companies will offer 

fewer rewards, and will charge higher annual fees and interest 

rates.6

How It Works 

The electronic card transaction is completed in several virtually 

simultaneous steps: 

Step 1: Customer presents the card to the Merchant for payment. 

Step 2: Merchant’s bank—the Acquirer—sends an authorization request to the payment card company whose name appears on the card, generally Visa or MasterCard.7

Step 3: Visa/MasterCard matches the Acquirer with the Cardholder’s bank—the Issuer—and charges the Issuer an Association Assessment Fee. 

Step 4: Issuer authorizes the transaction, debits Customer’s account, credits Acquirer, and charges Acquirer an Interchange 

Fee. 


jbell on PROD1PC69 with REPORTS
7 

8For example, if a customer makes a $100 purchase at a retailer, the merchant will pay on 

average $2.20 of that purchase to his bank—the acquirer. Of that amount, the acquirer receives 

a ‘‘processing fee’’ of approximately $.35 and pays an ‘‘interchange fee’’ of approximately $1.75 

to the customer’s bank—the issuer. The issuer in turn pays an ‘‘association assessment fee’’ of 

around $0.095 to Visa/MasterCard. 9 In some cases, the merchant instead forms a relationship with a ‘‘transaction service,’’ which 

matches the merchant and the bank offering an optimal merchant discount rate. 10Merchant Discount. FREE ENCYCLOPEDIA OF ECOMMERCE, http://ecommerce.hostip.info/ 

pages/722/Merchant-Discount.html (last visited July 16, 2007). 11 U.S. v. Visa U.S.A., Inc., 344 F. 3d 229, 239–40 (2d Cir. 2003). 12 Id. This case marked a departure from earlier suits challenging Visa’s practices. A 1980 

lawsuit, for example, challenged interchange on grounds that Visa’s setting of the fees constituted unlawful horizontal price-fixing. The court rejected it on both per se and rule of reason 

analyses grounds. The appellate court also rejected the challenge and the Supreme Court declined to hear the case. Nat’l Bancard Corp. v. Visa U.S.A., Inc., 596 F. Supp. 1231 (S.D. Fla. 

Sept. 20, 1984), aff’d, 779 F.2d 592 (11th Cir. 1986), cert denied, 479 U.S. 923 (1986). 13See, e.g., In re Visa Check/Mastermoney Antitrust Litigation, 2003 WL 1712568 (E.D.N.Y. 

April 1, 2003). 14 Kendall v. Visa USA, Inc., 2005 WL 2216941 (N.D. Cal. July 25, 2005). 15 Kendall v. Visa USA, Inc., 518 F.3d 1042 (9th Cir. 2008). 

Step 5: Acquirer places payment in Merchant’s account and 

charges a Processing Fee. 

Step 6: Merchant pays the Acquirer a Discount Rate—which is 

a percentage of the total transaction—that ultimately covers 

the Processing Fee, Interchange Fee, and Association Assessment Fee.8

In order to accept credit cards as a method of payment, a merchant must first establish a merchant account by forming a relationship with an acquiring bank.9 This relationship enables the 

merchant to process transactions and obtain payment from credit 

card purchases. The merchant discount rate, paid by the retailer 

each time a transaction occurs, is based on sales volume, type of 

payment card, type and size of accepting merchant (e.g. online, instore, phone order), and risk. The rate is determined by multiplying the total credit card volume by a percentage charged by the 

bank. Most rates fall between one and 3 percent, and are based on 

the rate requirements of a credit card company, such as Visa or 

MasterCard.10

Market Power and Efforts to Address the Problem with Antitrust 

Laws 

The issue of market power has been sufficiently borne out in the 

litigation between the merchants and the card companies over the 

years. For example, in 2003, the Second Circuit affirmed a district 

court’s decision that Visa and MasterCard have market power.11

Specific evidence supporting this affirmation was that approximately 85 percent of the general purpose cards issued in the 

United States are Visa and MasterCard. Based upon these and 

other findings, including that the market is very concentrated and 

there are high barriers to entry, the Second Circuit affirmed the 

trial court ruling that Visa and MasterCard ‘‘jointly and separately, 

have power within the market for network services.’’ 12

Liability has been established for antitrust violations by the credit card industry in recent years relating to the exclusionary rules 

the industry imposed and the tying of debit and credit cards.13 The 

only recent case that has been resolved was dismissed because it 

was insufficiently plead,14 and in March of this year, the Ninth 

Circuit affirmed the dismissal in Kendall v. Visa USA, Inc.15


jbell on PROD1PC69 with REPORTS
8 

16 In re Payment Card Interchange Fee & Merchant Discount Antitrust Litigation, No. 05-MD1720, 2008 WL 2428213 (E.D.N.Y. May 14, 2008). 17Labaton Sucharow LLP, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, http://www.labaton.com/en/cases/In-re-Payment-Card-Interchange-Fee-and-Merchant-Discount-Antitrust-Litigation.cfm (last visited July 14, 2008). 18 Id. 19 In re Payment Card Interchange Fee & Merchant Discount Antitrust Litigation, No. 05-MD1720, 2008 WL 2428213 (E.D.N.Y. May 14, 2008). 20Press Release, U.S. Dep’t of Justice, ‘‘Visa Inc. Rescinds Debit Card Rule as a Result of DOJ 

Dep’t of Justice Antitrust Investigation (July 1, 2008) (on file with author), http://www.usdoj.gov/ 

atr/public/presslreleases/2008/234577.htm. 21 Id. 

One case that is currently pending in district court may provide 

some resolution on the question of whether the card companies violate the antitrust laws in the setting of interchange fees. This class 

action, filed in New York in 2005 by a group of nationwide retailers,16 alleges that Visa, MasterCard and U.S. banks engage in collusive practices to fix credit card interchange fees. The plaintiffs 

seek damages and injunctive relief ‘‘alleging that Visa, MasterCard 

and their member banks have colluded to establish and fix the 

‘interchange fees’ and other fees charged to merchants for transactions processed over their credit card networks.’’ 17 According to 

Labaton Sucharow LLP, serving on the Executive Committee of 

this class action, ‘‘defendants exploit their credit card monopoly by 

forcing retailers to pay these increasing fees, they forbid them from 

passing on the cost to customers, and they forbid them from bypassing the credit card networks and processing the transactions 

through agreements with member banks.’’ 18 The plaintiffs have 

filed a consolidated complaint, and as of 2008, the case is still in 

discovery. A motion to dismiss by the defendants was recently denied.19

Further, on July 1, 2008, the Department of Justice closed an 

antitrust investigation into Visa Inc.’s restriction of particular PIN 

debit transactions after the credit card company repealed the regulation. The rule ‘‘required merchants to treat Visa-branded debit 

cards differently when used as a PIN-debit card (and processed via 

non-Visa networks) from the same cards when used as signature 

debit cards and processed on the Visa network.’’ 20 It was alleged 

that this was restricting PIN debit transactions, specifically those 

of small value ($25 and below) and transactions over the Internet, 

and also may have reduced competition between Visa and PIN 

debit networks. Thomas Barnett, Assistant Attorney General, Antitrust Division, said that although this investigation is closed, ‘‘the 

Department remains prepared to investigate allegations of anticompetitive conduct in this important industry.’’ 21

MERCHANT AND CONSUMER PERSPECTIVES

Competition and Antitrust Issues 

According to groups representing merchant interests, banks and 

their agents (Visa and MasterCard) collectively set interchange 

fees. They argue that as a result of this activity, the interchange 

fee is likely the same regardless of which bank issued the card 

used to make a purchase, or which bank signed up the merchant 

making the sale. MasterCard sets interchange fees on behalf of its 

approximately 20,000 member banks; Visa USA also sets interchange fees on behalf of its approximately 14,000 member banks. 

As MasterCard allows its member banks to also issue Visa cards, 


jbell on PROD1PC69 with REPORTS
9 

22 Id. 23Terri Bradford and Fumiko Hayashi, Developments in Interchange Fees in the United States 

and Abroad, Payment System Research Briefing. (Federal Reserve Bank of Kansas City, Kansas 

City, MO), Apr. 2008, available at http://www.kc.frb.org/Econres/PSR/Briefings/PSRBriefingApr08.pdf. 24The Food Marketing Institute (FMI), Hidden Credit/Debit Card Interchange Fees 1, available at http://www.fmi.org/gr/interchange/FMIonepager.pdf. 

and Visa USA likewise allows its members to issue MasterCard 

cards, many of Visa’s 14,000 members are also members of the 

MasterCard network. Merchants assert that this behavior is anticompetitive and may constitute price fixing. 

Higher Interchange Fees Benefit Banks 

Another argument made by merchant groups is that card companies increase fees to encourage banks to issue their cards. The 

higher the interchange fees charged by Visa or MasterCard, the 

more money will flow to their member banks, thus making Visa 

and MasterCard more attractive compared to other systems. Further, special premium payment cards like Visa’s Signature card or 

MasterCard’s World card charge even higher interchange rates to 

offset offering additional rewards. Merchant groups assert that the 

result is that member banks have every incentive collectively to ensure that the card system sets high interchange fees. 

Merchants also explain that because they must take the interchange fee into account when pricing products, consumers who pay 

by means other than payment cards end up subsidizing unrelated 

expenses such as marketing efforts by the card-issuing banks.22

Yet only the payment card users, and not customers who pay the 

same price using cash, earn benefits through points, miles, cashback features, and concierge services. 

Given the size of the United States’s economy and growing membership of Visa and MasterCard, merchant groups say that in a 

competitive market, scale and scope economies should result in declining interchange fees. Instead, they say the fees have doubled 

over the last 10 years. According to merchant group estimates, only 

13 percent of the interchange fee covers processing costs, while 44 

percent pays for rewards programs including marketing, advertising, network servicing, profits, and other expenses. They see this 

as the reason interchange fees have been on the rise, despite decreasing costs of technology. Other nations, including New Zealand, 

Australia, Poland, and those of the European Union, have already 

reduced, eliminated, or taken steps to limit interchange fees.23

Impact on Merchant Viability 

From the merchant perspective, as card payments become an increasing percentage of consumer transactions—replacing checks 

and cash—they become an even greater concern to all retailers. 

The Food Marketing Institute (FMI) says that in the past 10 years, 

many supermarkets have seen an increase in costs associated with 

credit and debit card fees of 700 percent and the merchant discount 

rate is ‘‘exceeding the 1 percent profit margin of a typical grocery 

store.’’ 24 Merchants maintain that the fee particularly impacts low 

margin businesses, where the charges have become the second 


jbell on PROD1PC69 with REPORTS
10 

25 Id. 26Tom Breen, Credit Card Fees: Some Gas Stations Say ‘‘No More,’’ ASSOCIATED PRESS, June 

18, 2008, available at http://ap.google.com/article/ALeqM5hOFuBRfjgTqd4WKI1nbvn 

X3VUOPAD91CKD800. 27 Id. 28Posting of Adam Levitin to http://www.creditslips.org/creditslips/2008/07/interchangeand.html#more (July 1, 2008, 23:22 EST). Credit Slips: A Discussion on Credit and Bankruptcy. 29 Ana Campoy, Gas Stations Hit Skids, WALL ST. J., July 7, 2008, at B12, available at http:// 

s.wsj.net/article/SB121538602450331005.html?mod=autoslfeature—articles. 30 Id. 31Michael Levenson, Gas Prices Drive Many Stations Out of Business, THE BOSTON GLOBE, June 19, 2008, available at http://www.boston.com/news/local/articles/2008/06/19/ 

gaslpricesldrivelmanylstationsloutloflbusiness/. 32 Bianna Golodryga and Lee Ferran, Credit Card Fees Up Gas Prices, ABC NEWS, July 9, 

2008, available at http://abcnews.go.com/GMA/story?id=5338007&page=1. 

highest expense, below only labor costs, with annual increases exceeding health care and energy costs.25

With the price of gas exceeding $4 a gallon and interchange fees 

still on the rise, gas station owners in particular have found their 

viability under serious threat. Last year, convenience stores paid 

nearly $7.6 billion in credit card fees, or more than double the industry profit of about $3.4 billion that year.26 As the Associated 

Press reports, in one case a small gas station owner yielded $60 

profit in 1 month on gasoline sales, but paid nearly $500 that same 

month in interchange fees. 

Although MasterCard has placed a cap on the fees for gasoline purchases of $50 or greater, and Visa recently announced that it 

would adjust its interchange rate schedule in response to gas 

prices, merchants insist that the change is not enough—or may 

even have the reverse impact.27 Visa, for example, lowered the 

interchange fees applied to all gas station purchases to 1.15 percent (from 1.5 percent) of the transaction price plus 25 cents flat 

fee. Closer analysis, however, shows that the result will be that 

consumers ‘‘making high dollar amount transactions [using Visa 

Signature Preferred Card] will pay less, but consumers with small 

transactions [using a regular rewards card] will pay more.’’ 28 Thus, 

most gas station owners—those that operate in an area where customers use the standard cards—will fail to benefit. 

The Wall Street Journal explains that higher gas prices ‘‘compound the fees that station operators must pay to credit-card companies, because the fees are calculated as a percentage of sales.’’ 29

Large energy companies as well as many one-store owners are 

exiting the gas-retailing business. Exxon Mobil announced in June 

that ‘‘it plans to sell its 2,220 stations in the U.S.; other oil companies already have shed most of theirs.’’ 30 For example, the Boston 

Globe wrote that, ‘‘[d]ozens of gas stations in Massachusetts have 

stopped selling gas or shut down, and hundreds more are expected 

to follow suit because rising costs coupled with crippling credit card 

fees and fewer customers make it impossible for them to afford the 

roughly $40,000 it costs to refill their underground tanks.’’ 31 Further, ABC News reports that ‘‘to combat the hefty fees that card 

companies are charging gas stations, many owners have passed the 

costs on to the consumer by charging more per gallon if the payment is made with plastic instead of cash.’’ 32

HEARINGS

The Committee on the Judiciary Task Force on Competition Policy and Antitrust Laws held two hearings on this issue. First, the 


jbell on PROD1PC69 with REPORTS
11 

Task Force held a hearing on July 19, 2007, titled ‘‘Credit Card 

Interchange Fees.’’ Testimony was received from Steve Smith, 

President and CEO, K-VA-T Food Stores, Inc.; John Buhrmaster, 

President, First National Bank of Scotia, New York; Edmund 

Mierzwinski, Consumer Program Director, U.S. PIRG; Timothy 

Muris, Of Counsel, O’Melveny & Myers; and Mallory Duncan, Senior Vice President and General Counsel, National Retail Federation. Second, the Committee held a legislative hearing on H.R. 

5546, the ‘‘Credit Card Fair Fee Act of 2008,’’ on May 15, 2008. 

Testimony was received from Tom Robinson, CEO, Robinson Oil 

Corporation; Joshua Floum, General Counsel and Corporate Secretary, Visa, Inc.; Joshua Peirez, Chief Payment System Integrity 

Officer, MasterCard Worldwide; John Blum, Vice President of Operations, Chartway Federal Credit Union; Steve Cannon, Chairman, Constantine Cannon, LLP; and Edward Mierzwinski, Consumer Program Director, U.S. Public Interest Research Group. 

COMMITTEE CONSIDERATION

On July 16, 2008, the Committee met in open session and ordered the bill, H.R. 5546, favorably reported with an amendment, 

by a rollcall vote of 19 to 16, a quorum being present. 

COMMITTEE VOTES

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the following 

rollcall votes occurred during the Committee’s consideration of H.R. 

5546. 

1. An amendment by Mr. Sherman to change the definition of 

‘‘merchant’’ so that it would mean any person who accepts credit 

cards or debit cards in payment for goods or services that they provide and employs fewer than 500 employees for each working day 

during each of the 20 or more calendar workweeks in the current 

or preceding calendar year. Defeated 9 to 22. 

ROLLCALL NO. 1 

Ayes Nays Present 

Mr. Conyers, Jr., Chairman ............................................................................... X 

Mr. Berman ....................................................................................................... X 

Mr. Boucher .......................................................................................................

Mr. Nadler ......................................................................................................... X 

Mr. Scott ........................................................................................................... X 

Mr. Watt ............................................................................................................ X 

Ms. Lofgren ....................................................................................................... X 

Ms. Jackson Lee ................................................................................................ X 

Ms. Waters ........................................................................................................

Mr. Delahunt .....................................................................................................

Mr. Wexler .........................................................................................................

Ms. Sa ́nchez ...................................................................................................... X 

Mr. Cohen ..........................................................................................................

Mr. Johnson ....................................................................................................... X 

Ms. Sutton .........................................................................................................

Mr. Gutierrez .....................................................................................................

Mr. Sherman ..................................................................................................... X 

Ms. Baldwin ......................................................................................................

Mr. Weiner ......................................................................................................... X 

Mr. Schiff ..........................................................................................................

Mr. Davis ........................................................................................................... X 

Ms. Wasserman Schultz .................................................................................... X 


jbell on PROD1PC69 with REPORTS
12 

ROLLCALL NO. 1—Continued 

Ayes Nays Present 

Mr. Ellison ......................................................................................................... X 

Mr. Smith (Texas) ............................................................................................. X 

Mr. Sensenbrenner, Jr. ...................................................................................... X 

Mr. Coble ........................................................................................................... X 

Mr. Gallegly ....................................................................................................... X 

Mr. Goodlatte .................................................................................................... X 

Mr. Chabot ........................................................................................................ X 

Mr. Lungren ....................................................................................................... X 

Mr. Cannon ....................................................................................................... X 

Mr. Keller ........................................................................................................... X 

Mr. Issa ............................................................................................................. X 

Mr. Pence .......................................................................................................... X 

Mr. Forbes ......................................................................................................... X 

Mr. King ............................................................................................................ X 

Mr. Feeney ......................................................................................................... X 

Mr. Franks ......................................................................................................... X 

Mr. Gohmert ...................................................................................................... X 

Mr. Jordan ......................................................................................................... X 

Total ................................................................................................ 9 22 

2. Motion to report H.R. 5546 favorably. Passed 19 to 16. 

ROLLCALL NO. 2 

Ayes Nays Present 

Mr. Conyers, Jr., Chairman ............................................................................... X 

Mr. Berman ....................................................................................................... X 

Mr. Boucher ....................................................................................................... X 

Mr. Nadler ......................................................................................................... X 

Mr. Scott ........................................................................................................... X 

Mr. Watt ............................................................................................................ X 

Ms. Lofgren ....................................................................................................... X 

Ms. Jackson Lee ................................................................................................ X 

Ms. Waters ........................................................................................................

Mr. Delahunt .....................................................................................................

Mr. Wexler ......................................................................................................... X 

Ms. Sa ́nchez ...................................................................................................... X 

Mr. Cohen ..........................................................................................................

Mr. Johnson ....................................................................................................... X 

Ms. Sutton ......................................................................................................... X 

Mr. Gutierrez .....................................................................................................

Mr. Sherman .....................................................................................................

Ms. Baldwin ...................................................................................................... X 

Mr. Weiner ......................................................................................................... X 

Mr. Schiff .......................................................................................................... X 

Mr. Davis ........................................................................................................... X 

Ms. Wasserman Schultz .................................................................................... X 

Mr. Ellison ......................................................................................................... X 

Mr. Smith (Texas) ............................................................................................. X 

Mr. Sensenbrenner, Jr. ...................................................................................... X 

Mr. Coble ........................................................................................................... X 

Mr. Gallegly ....................................................................................................... X 

Mr. Goodlatte .................................................................................................... X 

Mr. Chabot ........................................................................................................ X 

Mr. Lungren ....................................................................................................... X 

Mr. Cannon ....................................................................................................... X 

Mr. Keller ........................................................................................................... X 

Mr. Issa ............................................................................................................. X 

Mr. Pence .......................................................................................................... X 

Mr. Forbes ......................................................................................................... X 

Mr. King ............................................................................................................ X 

Mr. Feeney ......................................................................................................... X 


jbell on PROD1PC69 with REPORTS
13 

ROLLCALL NO. 2—Continued 

Ayes Nays Present 

Mr. Franks ......................................................................................................... X 

Mr. Gohmert ...................................................................................................... X 

Mr. Jordan ......................................................................................................... X 

Total ................................................................................................ 19 16 

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the findings 

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. 

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives is inapplicable because this legislation does not provide new 

budgetary authority or increased tax expenditures. 

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 5546, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 31, 2008. 

Hon. JOHN CONYERS, Jr., Chairman, 

Committee on the Judiciary, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5546, the Credit Card 

Fair Fee Act of 2008. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie, who can 

be reached at 226–2860. 

Sincerely, 

PETER R. ORSZAG, DIRECTOR. 

Enclosure 

cc: Honorable Lamar S. Smith. 

Ranking Member 

H.R. 5546—Credit Card Fair Fee Act of 2008. 

SUMMARY

H.R. 5546 would provide limited immunity from antitrust laws 

to merchants and financial services organizations that negotiate an 


jbell on PROD1PC69 with REPORTS
14 

agreement setting the terms for using electronic payment systems 

to process transactions using credit cards. A representative of the 

Department of Justice (DOJ) would be required to attend all negotiation sessions. The department would be required to make any 

agreements that result from the negotiations available to the public 

and to prepare an analysis and report of the results of the negotiations. 

Based on information from DOJ, CBO estimates that implementing H.R. 5546 would cost about $6 million in 2009 and $33 

million over the 2009–2013 period, assuming appropriation of the 

necessary amounts. Enacting H.R. 5546 would not affect direct 

spending or revenues. 

H.R. 5546 contains an intergovernmental mandate as defined in 

the Unfunded Mandates Reform Act (UMRA) because it would preempt State antitrust laws. CBO estimates that because the preemption would only limit the application of State law, the mandate 

would impose no costs on State, local, or tribal governments. 

H.R. 5546 would impose private-sector mandates, as defined in 

UMRA, on certain issuers for, acquirers for, and owners and operators of covered electronic payment systems as well as certain merchants using covered electronic payment systems. The bill also 

would prevent individuals from seeking damages under certain 

antitrust laws for negotiations authorized under the bill. CBO expects that the direct costs to comply with those mandates would 

not be significant and would fall below the annual threshold established in UMRA for private-sector mandates ($136 million in 2008, 

adjusted annually for inflation). 

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary impact of H.R. 5546 is shown in the following table. The costs of this legislation fall within budget function 370 (commerce and housing credit). 

By Fiscal Year, in Millions of Dollars 

2009 2010 2011 2012 2013 2009–2013 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level 7 6 7 7 7 34 

Estimated Outlays 6 6 7 7 7 33 

BASIS OF ESTIMATE

For this estimate, CBO assumes that the bill would be enacted 

near the start of fiscal year 2009 and that spending would follow 

historical patterns for similar activities. 

H.R. 5546 would provide limited immunity from antitrust laws 

to merchants and financial services organizations that enter into 

voluntary negotiations to set terms for using electronic systems for 

clearing credit card transactions. The bill would require the Antitrust Division of the Department of Justice to collect information 

about the parties’ schedule for negotiation and any agreements 

that would result from such negotiations. Further, a representative 

of the Antitrust Division would be required to attend all negotiation sessions. 


jbell on PROD1PC69 with REPORTS
15 

Because H.R. 5546 would provide broad authority for merchants 

and providers of electronic payment services to join together to negotiate rates and terms for access to a payment system, it is unclear how many negotiations may be initiated as a result of the bill. 

For example, a large number of small groups may form—that is, 

gas station owners, businesses with fewer than 50 employees, or retail merchants—or a smaller number of fairly large groups may 

form. Based on information from DOJ regarding the additional 

workload in the face of such uncertainty, CBO estimates that the 

agency would require an additional 35 staff positions to attend negotiation sessions for as many as 500 such groups, monitor the information submitted by the participating parties, and meet the 

bill’s reporting requirements. CBO estimates that implementing 

H.R. 5546 would cost $6 million in 2009 and $33 million over the 

2009–2013 period, assuming appropriation of the necessary 

amounts. The costs would be incurred mostly for salaries and benefits, as well as for start-up costs in the first year to set up information-collection systems. 

ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

H.R. 5546 contains an intergovernmental mandate, but CBO estimates that the mandate would impose no costs on State, local, or 

tribal governments. By exempting agreements between merchants 

and credit card companies from State antitrust laws, the bill would 

preempt State law. That preemption would be a mandate as defined in UMRA, but the bill would impose no duty on States that 

would result in additional spending. 

ESTIMATED IMPACT ON THE PRIVATE SECTOR

H.R. 5546 contains private-sector mandates, as defined in 

UMRA, because the bill would impose requirements on the 10 largest entities in each of the following categories: 

• Financial institutions that issue electronic devices such as 

credit cards and debit cards for use in an electronic payment 

system, or acquire access to electronic payment systems for 

merchants to use in accepting credit cards and/or debit cards 

for payment; 

• Owners and operators of electronic payment systems that 

have been used for at least 20 percent of the combined dollar 

value of U.S. credit; and 

• Merchants using certain electronic payment systems. 

Those entities would be required to provide information to the 

Antitrust Division of the DOJ. According to industry representatives, the costs to comply with those mandates would be small. In 

addition, the bill would exempt financial services organizations and 

merchants from certain antitrust statutes when negotiating access 

rates using the process authorized by the bill. As a result, private 

entities would be prevented from seeking damages under certain 

antitrust laws from entities participating in the negotiation process 

under the bill. Based on information from industry experts, the cost 

to comply with this mandate would likely be small as no such suits 

have been filed or are expected to be filed under current law. 

Therefore, CBO estimates that the aggregate cost of the mandates 

would fall below the annual threshold established in UMRA for priVerDate Aug 31 2005 04:19 Oct 04, 2008 Jkt 079006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6601 E:\HR\OC\HR913.XXX HR913

jbell on PROD1PC69 with REPORTS
16 

vate-sector mandates ($136 million in 2008, adjusted annually for 

inflation). 

ESTIMATE PREPARED BY: 

Federal Costs: Susan Willie (226–2860) 

Impact on State, Local, and Tribal Governments: Elizabeth Cove 

(225–3220) 

Impact on the Private Sector: Jacob Kuipers (226–2940) 

ESTIMATE APPROVED BY: 

Theresa Gullo 

Deputy Assistant Director for Budget Analysis 

PERFORMANCE GOALS AND OBJECTIVES

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 5545 will provide an antitrust exemption for merchants so they can negotiate 

with credit card companies with market power for interchange fee 

rates. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in article I, section 8, clause 3 of the Constitution. 

ADVISORY ON EARMARKS

In accordance with clause 9 of rule XXI of the Rules of the House 

of Representatives, H.R. 5446 does not contain any congressional 

earmarks, limited tax benefits, or limited tariff benefits as defined 

in clause 9(d), 9(e), or 9(f) of Rule XXI. 

SECTION-BY-SECTION ANALYSIS

The following discussion describes the bill as reported by the 

Committee. 

Sec. 1. Short title. Section 1 sets forth the short title of the bill 

as the ‘‘Credit Card Fair Fee Act of 2008.’’ 

Sec. 2. Limited Antitrust Immunity for the Negotiation and Determination of Rates and Terms for Access to Covered Electronic Payment Systems. Section 2(a) defines the following terms: ‘‘Access 

agreement,’’ ‘‘Acquirer,’’ ‘‘Antitrust Division,’’ ‘‘Antitrust Laws,’’ 

‘‘Credit card,’’ ‘‘Covered electronic payment system,’’ ‘‘Debit card,’’ 

‘‘Electronic payment system,’’ ‘‘Financial institution,’’ ‘‘Issuer,’’ 

‘‘Market power,’’ ‘‘Merchant,’’ ‘‘Negotiating party,’’ ‘‘Person,’’ ‘‘Provider,’’ ‘‘State,’’ ‘‘Terms,’’ and ‘‘Voluntary negotiated access agreement.’’ 

Section 2(b) sets forth the limited antitrust immunity for negotiation of access rates and terms to covered electronic payment systems. The section allows merchants and covered electronic payment 

systems to jointly negotiate and agree upon rates and terms for access to the system, including through the use of common agents. 

This section also specifies that the immunity does not apply to a 

provider of an electronic payment system, or to a merchant, during 


jbell on PROD1PC69 with REPORTS
17 

any period in which the provider or merchant is engaged in any 

unlawful boycott. 

Section 2(c) provides that the rates and terms of a voluntarily negotiated access agreement must be the same for all merchants, regardless of merchant category or volume of transactions generated, 

and shall also be the same for all providers, regardless of provider 

category or volume of transactions generated. 

Section 2(d) requires the parties, within 1 month after enactment 

of this Act, to file with the Antitrust Division a schedule for negotiations. If the parties do not file a schedule, the Antitrust Division 

must issue a schedule. Some parties are required to make initial 

disclosures to facilitate negotiations. These disclosures must be 

made by the ten largest issuers for a covered electronic payment 

system (in terms of number of cards issued), the ten largest 

acquirers (in terms of number of merchants served), and a person 

who operates or controls a covered electronic payment system. The 

disclosures must include an itemized list of costs necessary to provide the system for the most recent calendar year and any access 

agreement between that person and one or more merchants. The 

disclosures must also be made by the ten largest merchants (based 

on dollar amount of transactions made with the covered electronic 

payment system). The merchants must disclose an itemized list of 

the costs necessary to access the system during the most recent calendar year and any access agreement between that person and one 

or more providers of the system. The Antitrust Division shall resolve any disagreements as to whether a person is required to 

make an initial disclosure. A representative of the Antitrust Division will attend all negotiation sessions conducted under subsection 

(a). 

Section 2(e) requires any parties who reach a voluntarily negotiated access agreement to file with the Antitrust Division a copy 

of the agreement; the various components of the interchange fee; 

a description of how access fees that merchants pay are allocated 

among financial institutions and how they are spent; whether a 

variation in fees exists among card types; documentation relating 

to a voluntarily negotiated access agreement evidencing any consideration being given or any marketing or promotional agreements 

between the parties; a comparison of interchange rates in current 

use in the 10 foreign countries having the highest volume of credit 

card transactions with interchange rates charged in the United 

States under such agreement; and any amendments to the voluntarily negotiated access agreement or documentation. The parties 

must make this filing within 30 days after the date of execution of 

a voluntarily negotiated access agreement or amendment or after 

the creation of the documentation. The Antitrust Division will 

make this information publicly available. 

Section 2(f) requires the Antitrust Division to file a report to the 

House and Senate Judiciary Committees detailing the negotiations 

and, if an agreement is reached, whether such access rates and 

terms will have an adverse effect on competition and how such 

rates compare with access rates and terms in current use in other 

countries. The report must contain a chronology of negotiations, an 

assessment of the quality of data provided by the parties in their 

initial disclosures, an assessment of whether the parties negotiated 


jbell on PROD1PC69 with REPORTS
18 

in good faith, and recommendations concerning how Congress 

should respond to the conduct of the negotiations. 

Section 2(g) provides that section 2 may not affect liability in any 

action pending on the date of enactment of this section. 

Sec. 3. Opt-Out. Section 3 allows acquirers or issuers that are 

regulated by the National Credit Union Administration or that, together with affiliates, have assets of less than $1,000,000,000, to 

opt out of negotiations under the Act. 

Sec. 4. Cardholder Savings. Section 4 provides that any agreements reached under Section 2(c) shall ensure that any savings or 

benefits received as a result of this bill, whether it be by merchants 

or financial institutions, shall be passed on to the customers or employees. 

Sec. 5. Effective Date. Section 5 provides that the Act shall take 

effect on the date of enactment. 


jbell on PROD1PC69 with REPORTS
(19) 

1 Robert J. Samuelson, The Cashless Society Has Arrived, Newsweek, June 25, 2007 (available 

at http://www.msnbc.msn.com/id/19263119/site/newsweek/). 

ADDITIONAL VIEWS

The mark-up of H.R. 5546, the ‘‘Credit Card Fair Fee Act of 

2008’’ was unusual. The bill was reported favorably out of House 

Judiciary Committee by a vote of 19 ayes to 16 nays. That is not 

strange. What was peculiar was that ten Democrats and nine Republicans voted for the measure and eight Democrats and eight Republicans voted against it. While such results may not be uncommon in other committees, they are all but unheard of on the House 

Judiciary Committee. 

The Committee’s fractured vote reflects the complicated nature of 

the interchange debate. Every Member has constituents that 

strongly favor and oppose this legislation. That is to be expected 

when both MasterCard and Visa have tens of thousands of issuing 

banks and millions of accepting merchants. The debate has been 

clouded further by the contrasting, and, at times, completely contradictory claims made by both merchants and banks. 

What became clear during the Committee’s four and one-half 

hour consideration of the measure is that many Members, including those that voted against the bill, believe that there is a problem 

in the way that interchange rates are set in this country. It was 

equally apparent that most Members, including those that supported the legislation, have questions and concerns about how it 

will work in practice. 

BACKGROUND

In the last 10 years, America has gone through a radical transformation in the way it pays for its goods and services. In 1996 almost 80% of all transactions were made with checks or cash.1

Today, less than half of the purchases are conducted in those old 

ways. By 2010, the Nilson Report, an industry newsletter, estimates that consumers will use credit and debit cards for over 70% 

of all their purchases. The growth in the use of credit and debit 

cards has occurred in the old fashioned brick and mortar stores, 

but it has also facilitated a whole new brand of commerce. Without 

credit cards, e-commerce as we know it today would not exist. 

Properly used, credit cards offer many benefits for consumers 

and businesses alike. For consumers, they offer fraud protection, 

payment flexibility, the ability to track purchases and rewards 

miles. For merchants, they offer guaranteed, faster payment and 

the opportunity to expand business through Internet and phone 

sales. Further, some studies have shown that consumers who use 

credit or debit cards at the time of purchase are likely to spend 

more than they would otherwise. 


jbell on PROD1PC69 with REPORTS
20 

2Technically, the difference between what the merchant charges the consumer for the product 

and what the merchant receives from the issuing bank is called a ‘‘merchant discount fee.’’ However, the merchant discount fee is largely based on the interchange fees that are charged between banks in the course of the transaction. 3The Merchant Payments Coalition members are the Food Marketing Institute, National Association of Convenience Stores, National Grocers Association, National Retail Federation, National Association of Chain Drug Stores, American Petroleum Institute, Retail Industry Leaders 

Association, Petroleum Marketers Association of America, Society of Independent Gasoline Marketers of America, National Council of Chain Restaurants, National Association of College Store, 

National Association of Truck Stop Operators, International Association of Airport Duty Free 

Stores, National Association of Theater Owners, American Beverage Licensees, Bowling Proprietors Association of America, National Association of Shell Marketers, Interactive Travel Services Association, and the National Restaurant Association, among others. 4The Electronic Payments Coalition includes Advanta Corporation; Alabama Bankers Association; America’s Community Bankers; American Bankers Association; American Express Company; American Financial Services Association; Bank of America; Barclays Bank; Californian 

Bankers Association; Capital One Financial Corporation; Card Services For Credit Unions, Inc.; 

Citi; Colorado Bankers Association; Comdata; Consumer Bankers Association; Delaware Bankers Association; Financial Services Roundtable; Florida Bankers Association; Georgia Bankers 

Association; Hawaii Bankers Association; Hawaii Financial Services Association; HSBC North 

America; Independent Community Bankers of America; Iowa Bankers Association; JPMorgan 

Chase; Maryland Bankers Association; Massachusetts Bankers Association; MasterCard Worldwide; Mid-Atlantic Financial Services Coalition; Minnesota Card Coalition; Mississippi Bankers 

Association; Montana Bankers Association; National Association of Federal Credit Unions; Nebraska Bankers Association; Nevada Bankers Association; New Hampshire Bankers Association; 

New Mexico Bankers Association; New York Bankers Association; North Carolina Bankers Association; Ohio Bankers League; Ohio Financial Services Association; Oklahoma Bankers Association; Pennsylvania Bankers Association; PSCU Financial Services; Puerto Rico Bankers Association; South Dakota Bankers Association; Tennessee Bankers Association; Texas Bankers Association; U.S. Bank; Vermont Bankers Association; Visa USA; Washington Bankers Association; 

Washington Mutual; Wells Fargo; West Virginia Bankers Association; and Wisconsin Bankers 

Association. 

These benefits come at a price. Visa and MasterCard, the two 

largest credit card networks in the country, impose a number of 

fees on consumers. These include the interest that consumers pay 

on their purchases, as well as late fees and fees associated with reward programs. However, consumers pay a different fee, called an 

interchange fee, every time they make a purchase with a credit 

card. The interchange fee, which is set by Visa and MasterCard, is 

actually deducted from the funds that a merchant receives on a 

purchase. So, for example, if a consumer buys $100 worth of goods 

on his Visa card, the merchant only receives $98.50 from the 

issuing bank, with the $1.50 constituting the interchange fee.2

While the merchant pays this cost directly, it is ultimately passed 

on to consumers in the form of higher prices. 

The Merchants Payment Coalition 3 feels that the interchange 

fees are unduly high and unchanging, two things that they consider to be indicative of Visa and MasterCard’s anticompetitive 

practices. Second, they challenged Visa and MasterCard’s practice 

of keeping the rules surrounding interchange fees secret from the 

retailers themselves. They claimed that the only time that they 

learn of the contents of the interchange rules is when Visa and 

MasterCard assesses them a fee for violating the rules. 

Visa and MasterCard’s member banks have formed their own coalition, the Electronic Payments Coalition.4 They contend that 

interchange fees are necessary to conduct the complicated transactions that take place when a consumer uses a credit or debit card 

to purchase a product. The Electronic Payments Coalition thinks 

that retailers are trying to get the benefits of credit card payment 

systems (increased sales, guaranteed payment, Internet and telephone sales), without the costs, namely interchange fees. Partially 

as a result of the House Judiciary Committee’s hearings, both Visa 


jbell on PROD1PC69 with REPORTS
21 

5See, e.g., Benjamin Klein, Andres V. Lerner, Kevin M. Murphy, and Lacey L. Plache, Competition in Two-Sided Markets: The Antitrust Economics of Payment Card Interchange Fees, 

Antitrust L.J. 571 (2006). 

and MasterCard have begun publishing all of their rules on their 

website. 

THE INTERCHANGE FEE

One of the principal complaints against Visa and MasterCard is 

that the interchange fees that they set are higher than what they 

would be in a competitive environment. The Association for Convenience & Petroleum Retailing (NACS) estimates that its members paid credit card fees in the amount of $6.6 billion in 2006. By 

comparison, they claim that their members made $4.77 billion in 

profit in 2006. Simply put, from NACS’ perspective, the banks 

made more on the sale of goods at convenience stores than the convenience stores did themselves. The Merchant Payment Coalition 

insists that this is only possible because Visa and MasterCard 

dominate the market for credit card transactions, which merchants 

feel compelled to accept. The Merchant Payments Coalition also insists that these fees go to pay for the numerous credit card solicitations that people receive. 

By contrast the Electronic Payment Coalition insists that Visa 

and MasterCard set their interchange fees in a way that is designed to encourage banks to issue their cards and for merchants 

to accept them. They contend that the interchange fees must be 

high enough for issuing banks to take on the risks and responsibilities of issuing cards, such as the expenditures for marketing and 

fraud protection. Similarly, the fees they set cannot be so high that 

merchants would not want to accept the cards. Simply put, if too 

few merchants want to accept the cards, then consumers will not 

demand them and the whole system collapses. The Electronic Payment Coalition argues that the fact that the merchants now feel 

compelled to accept cards because so many consumers have them 

is a sign that the system is working. 

This kind of pricing structure is known as a two-sided market.5

On one side of the market are consumers, who are price sensitive. 

The evidence seems to be—based on the number and variety of 

credit card offerings, including no-fee cards—that there is intense 

competition on the part of issuing banks to obtain cardholders. On 

the other side of the market are the merchants, who are somewhat 

price insensitive. That is, banks can raise interchange fees—and 

the merchant discount fees—and most merchants will continue to 

accept the credit cards. 

This kind of cross-subsidization of users is not uncommon in twosided markets. The model that is frequently cited here is newspapers, where the merchants that purchase advertising in a newspaper subsidize the purchase price of the consumers who buy the 

paper at newsstands. In other words, absent the advertisers’ dollars, consumers would have to pay significantly more for a newspaper. However, in the newspaper context, merchants have the option of advertising in either a rival newspaper, on the radio, on TV, 

or over the Internet. That competition restrains the amount that 

newspapers can charge merchants for advertisements. 


jbell on PROD1PC69 with REPORTS
22 

6The difference in fees is also explained, in part, because online transactions—or so-called ‘‘no 

card present’’ transactions—present a greater risk of fraud for the issuing bank. 7 Visa U.S.A. Interchange Reimbursement Fees July 2008 (available at http://usa.visa.com/ 

download/merchants/visa-usa-july2008-interchange-rates.pdf). 

Within the context of payment systems, both Visa and 

MasterCard charge very different interchange fees on some types 

of merchants than they do on others. These differences may be accounted for by the varying demand for credit cards among industries. For example, grocery stores, which traditionally operated on 

cash and checks, were slow to adopt credit cards as a payment system. Accordingly, the credit card networks and issuing banks 

charged a lower interchange rate for purchases at grocery stores as 

a way to entice those stores to accept the cards. Conversely, online 

merchants could not exist without credit cards. As a result, they 

pay much higher interchange fees.6

These fees vary by merchant class, size of merchant, whether a 

card is present or not (higher fraud likelihood), and types of rewards offered. To use but one narrow example, a retailer that has 

a minimum of 45 million Visa credit card transactions totaling a 

minimum of $2.9 billion (and that meets certain other requirements) would be assessed an interchange fee of 2.3% + $.10 for an 

online sale (card not present) with a Visa Signature Preferred 

(highest rewards) card.7 That same merchant would be assessed 

1.65% + $.10 for a Visa Signature sale, and 1.43% + $.10 for a traditional rewards or no rewards card. 

If competition in the two-sided market works in the manner described by the credit card companies, then, theoretically, one would 

expect their ability to raise prices on merchants to be constrained 

by the merchants’ ability to switch to another form of payment (either another brand of credit card or cash or check). It is an open 

question, however, whether Visa or MasterCard has ever raised its 

rates so far on a class of merchants that it has become unprofitable 

for it to maintain that rate. That is, we do not know whether Visa 

or MasterCard has ever been compelled to lower its rates for a particular class of merchants because its higher interchange rates 

caused those merchants to either switch to another brand of credit 

card or to accept only cash or checks. 

Perhaps understandably, Visa and MasterCard have been reluctant to discuss the details of how they set their interchange rates. 

Further, while they dispute the merchants’ claims about how interchange fees are used, Visa and MasterCard have not—and they 

claim cannot—provided even a general accounting of how the 

issuing banks use interchange fees. However understandable, this 

lack of transparency does nothing to dispel Members’ concerns that 

merchants’ needs are not adequately considered in setting the fee. 

What does seem clear from the record before the Committee is 

that, on average, Visa and MasterCard’s interchange rates bear 

more than a passing resemblance to each other. They are significantly below the interchange fees charged by American Express 

and above the rates charged by Discover. Based on their advertising alone, it is clear that both Visa and MasterCard intend for 

their payment systems to replace the use of cash and checks in the 

near future. Given consumers’ recent spending habits, they may 

well get their wish. 


jbell on PROD1PC69 with REPORTS
23 

8 U.S. GEN. ACCOUNTABILITY OFFICE, CREDIT AND DEBIT CARDS: FEDERAL ENTITIES ARE TAK- ING ACTIONS TO LIMIT THEIR INTERCHANGE FEES, BUT ADDITIONAL REVENUE COLLECTIONS COST

SAVINGS MAY EXIST 25 (2008). 9 Id. 

10 15 U.S.C. a§ 1. 11See, e.g., Nat’l Bancard Corp. (NaBanco) v. Visa U.S.A., Inc., 596 F. Supp. 1231 (S.D. Fla. 

1984), aff’d 779 F.2d 592 (11th Cir. 1986); and Kendall v. Visa U.S.A., Inc., 2005 WL 2216941 

(N.D. Cal. 2005), aff’d 518 F.3d 1042 (9th Cir. 2008). 12 United States v. Visa U.S.A., Inc., 163 F. Supp. 2d 322, 340–42 (SDNY 2001), aff’d 344 F.3d. 

229 (2d Cir. 2003), cert. denied, 543 U.S. 811 (2004). 13 In re Visa Check/Mastermoney Antitrust Litigation, 297 F.Supp.2d 503, 2004–1 Trade 

Cases P 74,262 (E.D.N.Y. Dec 19, 2003), aff’d sub nom., Wal-Mart Stores, Inc. v. Visa U.S.A., 

Inc., 396 F.3d 96 (2d Cir. 2005), cert. denied, Leonardo’s Pizza by the Slice, Inc. v. Wal-Mart 

Stores, Inc., 544 U.S. 1044 (2005). 

Further, the U.S. Government Accountability Office recently 

found that the Treasury’s Financial Management Service, which 

handles the majority of the federal government’s card transactions, 

had tried—and failed—to negotiate lower interchange fees with 

MasterCard and Visa.8 The same report found that the U.S. Postal 

Service had ‘‘some limited success’’ in negotiations over interchange 

fees.9 Given the size of the entities involved, not to mention the 

backing of the full faith and credit of the U.S. Government, it is 

hard to imagine that smaller merchants would enjoy much success 

in directly negotiating interchange fees with MasterCard and Visa. 

While none of this makes for a clear-cut case of collusion between 

MasterCard and Visa regarding the setting of interchange fees, it 

has raised significant concerns in our minds about the fairness of 

the system. Even if MasterCard and Visa’s actions were appropriate when they were just getting started, as the recent antitrust 

cases against Microsoft prove, the kind of behavior that companies 

can engage in when they are small market players is not necessarily acceptable when their market shares grow to almost 80%. 

LITIGATION

Individual retailers and retailing associations, including members of the Merchants Payments Coalition, have sued MasterCard, 

Visa, and a number of issuing banks under Section 1 of the Sherman Act 10 for setting the interchange fee at levels higher than 

what a competitive market would allow. These suits have been consolidated in the Federal District Court for the Eastern District of 

New York. Currently, the suits are in the early phases of discovery. 

This is but the latest in a series of antitrust suits against Visa 

and MasterCard. Earlier efforts to challenge interchange rates on 

antitrust grounds in U.S. courts have not fared well.11 However, recent challenges to other credit card practices, have been more successful. For example, in the mid-1990s the Department of Justice 

successfully sued Visa and MasterCard for their rules that prohibited member banks from issuing a rival card (such as Discover or 

American Express).12 More recently, Visa and MasterCard agreed 

to pay over $3 billion in a settlement with Wal-Mart and other retailers for their practice of tying their debit and credit card offerings.13 Among other things, the settling retailers claimed that this 

tying practice resulted in higher interchange fees than they would 

have incurred in a competitive market. 

Visa and MasterCard, relying on cases such as NaBanco, are 

confident that they will successfully defend their interchange fees 

in the face of this court challenge. However, as the NaBanco court 


jbell on PROD1PC69 with REPORTS
24 

14 NaBanco, 779 F.2d at 605 (emphasis added). 

noted, ‘‘VISA is a joint venture-type enterprise in which the [interchange fee] acts as an internal control mechanism that yields procompetitive efficiencies that its members could not create acting 

alone, and helps create a product that its members could not 

produce singly.’’ 14 While that statement may have been true at a 

time when banking laws prevented banks from functioning as national entities, it is unclear whether the largest Visa and 

MasterCard issuers, such as Bank of America, Citibank, JP 

MorganChase, and Capital One could not create their own issuing 

networks free of the Visa and MasterCard brands. 

That said, Congress should be reluctant to intervene in ongoing 

litigation. However, the relief the merchants are seeking in this 

legislation could not be ordered by any court. To the extent that 

Congress provides a remedy through this, or other legislation, it 

will have to address whether such legislation will be the exclusive 

prospective remedy for the merchants. Of course, if a court finds 

that banks violated the antitrust laws in the establishment of 

interchange fees, then the merchants will be entitled to whatever 

monetary damages the court deems appropriate. 

ISSUES WITH H.R. 5546

Chairman Conyers introduced H.R. 5546, the ‘‘Credit Card Fair 

Fee Act of 2008,’’ on March 6, 2008. As introduced, the proposed 

legislation grants a limited antitrust exemption to both the banks 

and the merchants to negotiate jointly the terms and rates that 

banks charge merchants per consumer transaction. If the parties 

cannot agree voluntarily to such terms and conditions, then the 

parties are subject to an administrative procedure before a threejudge panel that will determine the rates and terms for a three 

year period. The three-judge panel will be selected and administered by the Department of Justice’s Antitrust Division and the 

Federal Trade Commission. 

Criticisms of the bill range from the practical, such as how all 

of the merchants and all of the banks would effectively negotiate 

an interchange fee agreement, to the philosophical, such as the 

Antitrust Modernization Commission’s admonition that antitrust 

immunities should be granted rarely. Given that this bill would authorize one of the largest antitrust exemptions in history, these are 

areas in which Committee oversight could be particularly valuable. 

Many of these criticisms were heard at a hearing in the Task 

Force on Competition Policy and Antitrust Laws on May 15, 2008, 

at which the following witnesses testified: Mr. Thomas L. Robinson, 

Vice President of Regulations, National Association of Convenience 

Stores; Mr. Joshua R. Floum, General Counsel and Corporate Secretary, Visa Inc.; Mr. Joshua Peirez, Chief Payment System Integrity Officer, MasterCard Worldwide; Mr. Steve Cannon, Chairman, 

Constantine Cannon LLP; Mr. John Blum, Vice President of Operations, Chartway Federal Credit Union; and Mr. Ed Mierzwinski, 

Consumer Program Director, U.S. Public Interest Research Group. 

Following the hearing, on June 2, 2008, Ranking Member Smith 

sent a letter to the Federal Trade Commission and the Department 

of Justice requesting their views on H.R. 5546. The DOJ responded 


jbell on PROD1PC69 with REPORTS
25 

on June 23, 2008, with a letter expressing reservations about the 

creation of an antitrust exemption for merchants to counter-balance the perceived market power of the banks. The Department 

also suggested that this bill likely would not benefit consumers because it would result in the loss of airline miles and other card 

benefits. The Department had significant concerns about the threejudge panel, including an assertion that it violates the appointments clause of the Constitution. 

The FTC responded on June 19, 2008. The FTC observed that 

antitrust exemptions should be disfavored and only granted when 

there is a clear showing of need. However, the Commission did not 

opine that the need had not been demonstrated here. With respect 

to the administrative burden that the bill would place on the FTC, 

the Commission wrote that ‘‘a governmental process for setting 

prices for private transactions is at odds with the Commission’s 

mission . . . in promoting open market competition.’’ The Commission also noted that splitting the administrative responsibilities between DOJ and FTC could complicate the administration of the 

three-judge panel. 

Chairman Conyers attempted to address these concerns by eliminating the three-judge panel and replacing it with DOJ oversight 

over the negotiations. The manager’s amendment also provided an 

opt-out from the negotiations for small banks and credit unions and 

had language that would try to ensure that consumers received the 

benefits of this legislation. In the main, these were good changes, 

but they raise as many questions as they answer. 

No one knows how these new oversight and reporting requirements will burden DOJ. For example, the bill requires that the 

merchants and banks file a schedule for negotiations with the Department’s Antitrust Division. If they do not file such a schedule, 

the Antitrust Division is required to formulate a schedule and inform the parties. How the Antitrust Division will identify all of the 

parties—including the tens of thousands of issuing banks and the 

millions of merchants involved—much less notify them all is uncertain. 

The opt-out provision for small banks and credit unions is new, 

too. No one knows which small banks will take this opt-out or how 

that will affect negotiations between the other parties. 

Similarly, while the bill requires banks and merchants to negotiate, it says nothing about what happens if the parties cannot 

reach a voluntary agreement. Given the number of negotiating parties involved, not to mention the stakes of the negotiations, it is 

more likely than not that the negotiations will not result in any 

agreement. In such a case, would the prevailing rates at the time 

of enactment control? No one knows. 

Finally, as noted in extensive debate at the mark-up, most Members want to see a majority of any savings in this bill passed on 

to consumers in the form of lower prices. While the manager’s 

amendment attempts to address this issue, it is entirely unclear 

how that provision will actually work. There is no visible enforcement mechanism in the provision. While courts tend to frown on 

implied causes of action, it is safe to assume that trial attorneys 

will attempt to take advantage of this pass-through language as a 


jbell on PROD1PC69 with REPORTS
26 

means to sue merchants large and small. At the end of the day, we 

might see judges setting retail prices if this bill were enacted. 

In conclusion, we believe that the merchants have raised some 

significant concerns about the fairness of the current interchange 

system. On the other hand, we recognize that this bill is not the 

only proposed solution—or perhaps even the right solution—to the 

problem. 

The legislative process is long. This bill will not become law this 

Congress. We hope that future Congresses will examine the issues 

outlined above. In the meantime, the parties would be well served 

to sit down and negotiate a solution that does not involve Congressional intervention. 

LAMAR SMITH. 

BOB GOODLATTE. 

DARRELL ISSA. 


jbell on PROD1PC69 with REPORTS
(27) 

DISSENTING VIEWS

The debate in Committee indicated that this legislation would 

not necessarily have a positive impact on the consumer, small businesses or the retail industry at large. 

As Members debated the bill, it became apparent to many that, 

whatever its stated intent, the result is a legislative intervention 

into how two industries should divide up a one or two percentage 

points of revenue, an unseemly exercise for a policymaking body in 

what is still a free market. One person’s cost is another person’s 

revenue, and it is understandable that those that have chosen low 

margin business models, such as gasoline retailers and grocers, 

would like to lower their costs. The legislation, however, would also 

provide relief to high margin businesses of all sizes. Even an attempt to rationalize the legislation, such my small business amendment, did not address the fact that many small businesses have no 

problem passing these costs on to consumers. The fact that a 

branded gasoline retailer is limited by an oil company to a margin 

of between 7 and 13 cents per gallon regardless of the price of gasoline, and the fact that the oil company generally negotiates its own 

deal with the credit card processor or acquiring bank, further limiting cost recovery by the retailer, does not to me provide a basis 

for government intervention in the setting of the share of costs that 

retailers pay for the considerable benefits of accepting electronic 

transactions. As I noted in my opening statement, just the shifting 

of the credit risk alone is a substantial benefit. 

Regarding specific issue of anti-trust policy, one of the primary 

flaws in the legislation is the antitrust exemption it grants to two 

entire industries to allow for anticompetitive negotiations. I do not 

believe there is a problem in the payment card acceptance marketplace. But, if there were, the solution would be to rectify it either 

through enforcement of existing law or reviewing the adequacy of 

existing competition law. This legislation, however, apparently represents the views that two wrongs do, in fact, make a right. Instead of fixing any underlying competition problem, the bill simply 

waives competition law requirements so that merchants can negotiate in abusive and collusive ways. This exemption is bad for competition and bad for consumers. 

This Committee did not fully explore the ramifications of the 

antitrust immunity included in H.R. 5546. At no time for the 

record did we hear from independent antitrust experts, the Administration, or any other disinterested expert on competition law. 

This, by itself, should have been a ‘‘red flag’’ to my colleagues that 

something was amiss with the bill. However, interested Members 

of the Committee need not look far for relevant discussions of the 

harms that H.R. 5546 will cause to consumers and competition. 

One reliable source for information about antitrust proposals is 

the Antitrust Modernization Commission (‘‘AMC’’) which was legisVerDate Aug 31 2005 04:19 Oct 04, 2008 Jkt 079006 PO 00000 Frm 00027 Fmt 6601 Sfmt 6601 E:\HR\OC\HR913.XXX HR913

jbell on PROD1PC69 with REPORTS
28 

lation drafted by the former Chairman in his first term. This august body was created by Congress to provide expert guidance as 

to whether our antitrust laws should be modernized. The AMC was 

made up of bipartisan antitrust experts, and it provided worthwhile analysis of the state of our antitrust laws and whether such 

laws needed revision. The AMC issued unanimous findings relating 

to granting exemptions from the antitrust laws. The following 

quotes leave little doubt about the wisdom of granting wholesale 

antitrust exemptions, as is proposed in H.R. 5546: 

‘‘While the beneficiaries of an exemption likely appreciate reduced market pressures, consumers (as well as non-exempted 

firms) and the U.S. economy generally bear the harm from the 

loss of competitive forces.’’ Antitrust Modernization Report and 

Recommendations at 335. 

‘‘Typically, antitrust exemptions create economic benefits that 

flow to small, concentrated interest groups, while the costs of 

the exemption are widely dispersed, usually passed on to a 

large population of consumers through higher prices, reduced 

output, lower quality, and reduced innovation. The concentrated benefits provide incentives for interested parties to 

seek immunities from Congress, but the diffuse costs often 

have sufficiently minimal impact on individual consumers that 

they are unlikely to oppose the creation of immunities. Congress therefore is unlikely to hear from those who would be adversely affected by a proposed antitrust exemption.’’ Id. at 335. 

‘‘Antitrust exemptions can harm the U.S. economy and, in the 

long run, reduce the competitiveness of the industries that 

have sought antitrust exemptions.’’ Id. at 335. 

‘‘Statutory exemptions from the antitrust laws undermine, 

rather than upgrade, the competitiveness and efficiency of the 

U.S. economy.’’ Id. at 335. 

‘‘Statutory immunities from the antitrust laws should be 

disfavored. They should be granted rarely, and only where, and 

for so long as, a clear case has been made that the conduct in 

question would subject the actors to antitrust liability and is 

necessary to satisfy a specific societal goal that trumps the 

benefit of a free market to consumers and the U.S. economy in 

general.’’ (emphasis in original) Id. at 335. 

The AMC is not alone in its general disdain for antitrust immunities. Indeed, prior to the Committee’s consideration of H.R. 5546, 

the Chairman of the Committee received a letter from four bipartisan antitrust experts. The authors were two former Chairmen of 

the Federal Trade Commission (one a Democrat and one a Republican) and two former Assistant Attorneys General of the Antitrust 

Division within the Department of Justice (again, one a Democrat 

and one a Republican). In the letter, the authors describe the 

harms of H.R. 5546, including the potential harm to consumers. 

The Ranking Member of this Committee also asked for input on 

H.R. 5546 from the Department of Justice and the Federal Trade 

Commission. In their respective letters, both agencies expressed 

significant concerns about H.R. 5546. For example, the Department 

of Justice expressed ‘‘serious concerns’’ about the legislation beVerDate Aug 31 2005 04:19 Oct 04, 2008 Jkt 079006 PO 00000 Frm 00028 Fmt 6601 Sfmt 6601 E:\HR\OC\HR913.XXX HR913

jbell on PROD1PC69 with REPORTS
29 

cause the proposed antitrust exemption could harm consumers in 

a variety of ways. The Federal Trade Commission reiterated the 

concerns raised by the AMC in connection with congressionally 

granted immunities from antitrust laws. 

It would seem that antitrust exemptions are generally not a preferred option for Congress, even if there is market dysfunction. 

They are especially unwise, however, when other remedies are 

available as would seem to be the case with merchants and payment card networks. Merchant representatives have stated repeatedly that the large payment card networks will not negotiate with 

them about the terms and rules for access to those networks. This 

is not my understanding. In fact, the Committee received emphatic 

testimony to the contrary. (One merchant witness even admitted 

that he had never even tried to negotiate with either Visa or 

MasterCard.) I recognize that others appear to disagree with my 

view on this. Regardless of one’s views of the current marketplace, 

however, one does not need to support H.R. 5546 to give merchants 

a ‘‘voice’’ with the networks. Specifically, the merchants are currently in mediation with each of the networks as part of the continuing class action litigation against the networks and banks. Either the mediation or the litigation may provide merchants the relief they seek. Perhaps this Committee should review how that 

process unfolds before proceeding further with H.R. 5546. 

In sum, it appears that there are significant concerns about antitrust immunities from a variety of experts in the field. Equally telling, I am unaware of any antitrust experts that are willing to defend the antitrust exemption in H.R. 5546 on its merits. (It may 

be worth noting that the Committee did hear from W. Stephen 

Cannon, who represented the merchant lobbyists supporting H.R. 

5546. He did not specifically address the policy behind the antitrust 

immunity granted in H.R. 5546, nor did he address the apparent 

discrepancy in his support for H.R. 5546 compared with the unanimous findings of the AMC quoted above. Mr. Cannon was a commissioner.) Furthermore, it turns out that the legislation is not 

even necessary to get both sides into the same room for discussions. I urge my colleagues to oppose this unnecessary and harmful 

bill. 

F. JAMES SENSENBRENNER, JR. 

Æ 


jbell on PROD1PC69 with REPORTS