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From the earliest of times, merchants have sought to sell goods to consumers and consumers have wanted to buy goods from merchants. Of course, as time rolled on and the number of players and volume of marketplace transactions increased, opportunities arose for a variety of market facilitators to bring merchants and consumers together with greater efficiency and reduced transactional risk.
In modern economies, credit card networks, issuers, and acquirers play significant roles as such market facilitators. Their role is primarily to make consumer payment-the critical component of any transaction-more convenient, expand consumer purchasing power by extending credit, and virtually eliminate credit risk as between merchants and consumers. The result is an economy that is larger and a marketplace that is more efficient than it otherwise would be.
Recently, however, merchants worldwide have challenged aspects of their relationship with these facilitators alleging that some of the fees and rules relating to their respective services are unfair and do not reflect the real value to merchants. The stakes are high: by one estimate, Visa, American Express, MasterCard, and Discover facilitated roughly $2.399 trillion in credit and charge card spending in 2013.' Consequently, competition authorities, governments, courts, and tribunals around the world, from the United States to South Korea, are grappling with how best to balance the essential market-facilitating role of each player with necessary protections to ensure that the credit card industry functions competitively. A recent decision by the U.S. District Court for the Eastern District of New York in American Express v. United States that has yet to determine a remedy, a private action by WalMart, and a precedent-setting class action in Canada indicate that these issues remain unsettled and that complete solutions remain elusive.2 Unfortunately, despite clearly having a shared interest in the success of the credit card system, relations between the players have become so frayed that one court remarked "the vitriol and poor behavior and feigned hysteria mask complex and difficult issues on which reasonable merchants can and do disagree."3
Industry Background
Players. The credit card system involves five different players: networks, issuers, acquirers, merchants, and cardholders.4 Networks (e.g., Visa and MasterCard) provide credit card payment infrastructure and services for credit, such as authorization, clearance, and settlement of transactions. They do not...