Counterparties: The largest antitrust settlement in US history?

By Ben Walsh
July 16, 2012

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

In a week full of scandals and financial restatements, MasterCard, Visa and a handful of the country’s biggest banks nonetheless managed to stand out: in the largest antitrust settlement in US history, they have agreed to pay $7.25 billion.

The case centered on the “swipe fees” charged by card companies each time consumers pay with credit or debit. Those fees had been fixed, and passed along by stores to consumers. Now, retailers will get to negotiate the fees. The settlement is a coup for retailers.

For consumers, the result is much more ambiguous. Swipe fees may come down, but retailers can now add surcharges for paying with plastic. That practice was previously banned by Visa and MasterCard. A discount could be given for cash, as some gas stations did, but up-charging to cover the swipe fee wasn’t allowed. However, Karen Weise notes that surcharges could help consumers by giving retailers newfound leverage: The “threat of the extra fee could be a new weapon for big retailers as they negotiate” with the card companies.

Kevin Drum isn’t too excited about those negotiations. “Frankly,” he writes, “in a war between Visa and Walmart, I can’t get very excited about who wins”. He is, however, enthused by what we might learn from retailers’ experience implementing surcharges:

If they end up doing it, it’s pretty good evidence that fees were too high and were being paid at least partly by unwitting consumers, many of whom prefer the option of switching to cash once they realize the real price of using plastic. If they don’t, and things stay pretty much the same as they are today, it’s pretty good implicit evidence that everyone was getting a tolerably reasonable deal already.

And that’s how the largest antitrust settlement in US history turns into a massive microeconomics study. – Ben Walsh

On to today’s links:

Appointments
Google’s Marissa Mayer named CEO of Yahoo – Dealbook

Data Points
“Increasingly clear that the US economy is slowing” – retail sales drop for third month in a row – Reuters

Charts
Mapping stop-and-frisks and gun seizures in New York City – WNYC

Politicking
A tour of the magical mystery behind Mitt Romney’s IRA – Bloomberg
Did Romney put Bain Capital shares in his IRA? – Felix
And now the Democrats are threatening to push the US economy over the “fiscal cliff” – WaPo

Level Playing Fields
The nation’s biggest brokerage firms give hedge funds an early look at analysts’ stock views – NYT

Plutocracy Now
196 Americans – 0.000063% of the population – have given more than 80% of super PAC dollars spent on the presidential election – Lawrence Lessig

Austerity Bites
Madrid’s “shoestring Olympics” proposal calls for using bullrings as basketball courts for the 2020 games – WSJ

EU Mess
ECB now open to imposing haircuts on senior creditors of European banks – WSJ
IMF lowers global growth forecast – IMF

‘Liebor’
Treasury’s 2008 recommendations for fixing Libor were basically verbatim banking industry suggestions - Huffington Post
“As a company, we now avoid London. It’s tarnished” – Bloomberg

Hoarders
US banks sitting on three times more cash globally than the Fed reports – David Cay Johnston

Good News
Africa’s mobile banking boom – CFR

Odd But True
“If it looks like a duck and smells like a duck, it could well be a delicious peanut butter sandwich” – Gary King and Margaret Roberts

Oxpeckers
Margaret Sullivan is the new NYT public editor – NYT

Be Afraid
The “best hope for an egalitarian future may well be a democratising, skill-premium-erasing technological revolution” – Economist

Departures
Ed Ruschas, the last artist on the board of MOCA, leaves – LAT

11 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Regarding SuperPac spending…has anyone actually studied the extent to which all this spending actually affects the outcome of elections?

Given that the money mostly gets spent on TV advertising, which most sane people try to tune out, it may not have as much of an impact as people think.

At the Presidential level, I’m guessing the impact is relaitvely minimal, but I would think its much bigger in Senate/House/gibernatorial races.

Posted by mfw13 | Report as abusive

Groupon update…
October 27, 2011: “Henry Blodget has a smart post on how to value Groupon today. Is he right that it’s vastly overpriced at a $10 billion valuation?”

Evidence:
http://www.google.com/finance?chdnp=1&ch dd=1&chds=1&chdv=1&chvs=maximized&chdeh= 0&chfdeh=0&chdet=1342497960203&chddm=676 43&chls=IntervalBasedLine&q=NASDAQ:GRPN& ntsp=0

Presently at a $5B valuation. Might still be too much? Business is falling off, and they STILL haven’t turned a profit.

Posted by TFF | Report as abusive

mfw13, the money is not just for TV ads but mostly for marketing companies that can study the election issues and spin things for the candidate. The marketing companies tell the candidate what his message should be and where his opponent may be weak. The more you can spend, the more finely tuned your message will be. Look at Florida, I guarantee that the Republicans hired a consultant and asked the question, “How can we make sure that we win this state?”, The answer was to limit the ability of minorities to vote. That is what more money can buy for you. An election…

Posted by Potatoe1 | Report as abusive

Potatoe1,

In theory you are correct…logic says that spending gobs of money should enable you to influence voters.

BUT, I’ve yet to see any actual evidence that it does so.

You bring up Florida….right now the polls say Obama has a 5-7 point lead there, despite all the GOP to make it harder to vote….

Posted by mfw13 | Report as abusive

mfw13, They said the same thing in 2004 but Bush won anyways. Thank you for the reply. :-) “Some of the issues described above have created problems for voters generally. Others, however, by accident or (it is charged) by design, have disproportionately affected racial minorities. For example, the U.S. Commission on Civil Rights determined that, in Florida in 2000, 54 percent of the ballots discarded as “spoiled” were cast by African Americans, who were only 11 percent of the voters” From Wiki. Money does talk.

Posted by Potatoe1 | Report as abusive

There are definitely a number of details like that to take into consideration. That may be a great point to convey up. I supply the ideas above as general inspiration however clearly there are questions like the one you deliver up where an important thing shall be working in sincere good faith. I don?t know if best practices have emerged around things like that, however I’m sure that your job is clearly recognized as a good game. Both girls and boys feel the impact of only a second’s pleasure, for the remainder of their lives.

Kimree is a world-leading e-cigarette company. According to Frost & Sullivan, Kimree was the second largest e-cigarette designer and manufacturer in the world in terms of both revenues and production volume in 2013. The Company designs and produces a broad range of e-cigarette products, including disposable e-cigarettes, rechargeable e-cigarettes and e-cigarette accessories. Visit http://www.kimree.com/ for more.

It’s genuinely very complicated in this busy life to listen news on Television, therefore I just use web for that purpose, and obtain the latest news.

This is the topmost most document that you just post making use of your misunderstandings.

I must congratulate yourself on exactly how your web site has long been introduced with such desirable looks really

Thanks a lot for providing individuals with such a pleasant possiblity to read in detail from this website. It’s always very good and as well , jam-packed with a great time for me personally and my office peers to visit your web site not less than three times in one week to see the latest tips you have got. And of course, I’m so certainly fulfilled with all the powerful secrets you serve. Some 3 areas in this article are without a doubt the most effective I have had.