Wednesday, April 30, 2008

Don't negotiate, legislate!

I think cars are too expensive. I blame the greedy car companies and I want Michigan congressman John Conyers to set the price of automobiles. While Congress is at it, let's set the price of gasoline since there's no greater success story in world history than government intervention into free trade. In today's Boston Globe, Jeff Jacoby suggests that Congress has no business telling the credit card companies their business:

As card transactions have grown more popular, interchange fees have skyrocketed. They now amount to $35 billion a year, and some retailers want the government to compel Visa and MasterCard to lower them. Legislation sponsored by US Representatives John Conyers, Democrat of Michigan, and Chris Cannon, Republican of Utah, would require the credit-card associations to enter into formal negotiations with retailers; if agreement weren't reached, it would authorize a three-judge panel to unilaterally impose interchange fees.

And why would retailers, who surely wouldn't want government bureaucrats telling them what to charge for coats or computers or Cracker Jack, want Visa and MasterCard to be told what to charge for credit-card services? Because, they claim, the card networks have so much power that they are immune to the market pressures that would be driving interchange fees down in a truly competitive market.

But Visa and MasterCard are hardly monopolies, and merchants are not without other options. No one is forced to accept Visa and MasterCard; retailers are free to take only American Express or Discover, which operate on a different model and don't charge interchange fees. Online vendors have even more choices, such as PayPal or Google Checkout. And, of course, there are the old standbys: cash and checks.
Cash? Do people still use that?

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