No Credit to Congress: House Judiciary Committee Votes on Price Controls

James Gattuso / July 15, 2008

In 1979, Robert Schuettinger and Eamonn Butler wrote a book called “Forty Centuries of Wage and Price Controls,” detailing 4,000 years of disastrous attempts by government to control market prices. Tomorrow, the House Judiciary Committee will vote on adding a 41st century to that litany of failure. The target: credit card “interchange fees.”

Interchange fees are the fees paid by one bank to another, and passed on to merchants, as the price for processing a credit card purchase. They are set by credit card associations, such as MasterCard and Visa based on complex formulas, but average around two percent of each transaction.

The stores that pay these fees have long complained that these fees are too high. And, they say, faced with the market power of the credit card associations, they have no ability to bargain them down.

This claim is suspect, to say the least. (more…)