Mr. Duncan MacDonald

GLG News by Mr. Duncan MacDonald, Consultant

GLG News is now G+ Insights

G+ is a community for professionals, academics and entrepreneurs to connect through online discussions and in-person meetings. You will continue to see G+ Insights (formerly GLG News) here as well as on the G+ website, where you can share and discuss the G+ Insights you read.

Football decision jeopardizes bankcard interchange

May 24, 2010

Analysis of:Supreme Court Revives Antitrust Suit Against NFL | online.wsj.com

The Supreme Court today opened the door to allow a greater application of antitrust law to joint ventures. The joint venture here is the National Football League and it is replicated in scores of similar JVs across the economy. The Visa and MasterCard networks were JVs until recently. The NFL decision suggests that when they were, their product distribution and pricing practices would have been subject to antitrust scrutiny under a reasonableness standard.

Senate balkanizes retail banking

May 19, 2010

Analysis of:Senate amendment broadens states' leeway in cases against national banks | www.washingtonpost.com

The latest amendment to the bank reform bill before the Senate will modestly open the door to state Attorney's Generals to enforce state and federal laws against banks that sell loans across state lines, like credit cards. In effect, it would dent the historically impregnable wall known as preemption -- the power of the feds to prevent law enforcement against federally chartered banks by states and private parties.

Credit card interest rate caps?

May 18, 2010

Analysis of:Banks Face New Threat to Credit Cards in Reg Reform Bill - American Banker Article | www.americanbanker.com

The article is about an attempt by a House member to require that credit card APRs be determined by state and not federal law. Most credit cards are priced according to a uniform rate based on the state headquarters of the creditor. Issuers like Citi, BofA, Macy's, et al export market determined rates from places like South Dakota, Delaware, etc. -- states with liberal statutes that do not cap APRs. Pricing by state would reduce APRs in half the states and thus issuer revenues.

Impact of debit card fee legislation exaggerated

May 16, 2010

Analysis of:Shares fall on debit card fees plan | www.ft.com

An amendment to the bank reform bill in the Senate would reduce debit card interchange fees that benefit bank card issuers and indirectly Visa & MasterCard. Media reports, including this one, are estimating its cost to the bankcard industry in the billions. Are they on target or overdoing it?

EU bankcard interchange fee settlement: US ramifications

April 26, 2010

Analysis of:Visa Europe to Cut Debit-Card Fees | online.wsj.com

Visa Europe has settled the EU's antitrust action against its major debit card interchange fees. It will reduce them by up to 60% The settlement does not cover credit card interchange. And it has nothing to do with the interchange lawsuits in the US. Visa Europe is an independent company with a license from Visa, Inc. to sell its products.

Our $48 Billion Credit Card Bill

April 21, 2010

Analysis of:Op-Ed Contributor - Our $48 Billion Credit Card Bill | www.nytimes.com

That's the title of an op-ed in today's New York Times that argues in favor of reducing bankcard interchange pricing to zero from an alleged $46B per annum currently. Its aim is not the class action antitrust lawsuit in a federal court in Brooklyn on the matter. Instead, it wants Congress to amend the bank reform bill to force that result. The author says nothing about the probable consequences, were the law to pass, for banks, taxpayers, cardholders.

Are the lawsuits against Toyota a blessing in disguise?

March 15, 2010

Analysis of:Lawyers Vie for Lead Roles in Toyota Lawsuits | online.wsj.com

The article is about the pending consolidation of the scores of lawsuits filed against Toyota across the US related to its sudden acceleration problem. The key aim of the plaintiffs' lawyers is to ensure that a favorable court is chosen to try the consolidated case. That is, a court that will have a favorable judge and a jury the lawyers can manipulate, and that will support certification of the case on a class basis. Toyota's lawyers will want the opposite, except perhaps on the class issue.

Trial of price fixing suit threatens bankcard interchange lawsuit

January 14, 2010

Analysis of:Recorded Music Price-Fixing Suit Reinstated | online.wsj.com

The 2nd Circuit Court of Appeals has ordered a trial of a price fixing lawsuit involving two music industry joint ventures. The case is important to the bankcard industry because it is facing a multi-billion dollar antitrust class action over the interchange prices Visa and MasterCard (each a joint venture) impose on merchants that accept their cards. That case is also under the jurisdiction of the 2nd Circuit.

NFL Supreme Court case should worry bankcard networks

January 14, 2010

Analysis of:Supreme Court Skeptical of N.F.L.'s Antitrust Claim - NYTimes.com | www.nytimes.com

The issue yesterday before the US Supreme Court was whether the National Football League should be treated as a "single entity" for antitrust purposes. The outcome would determine how far a joint venture like the NFL can go in limiting member business practices, e.g., via exclusive dealing arrangements. Prior to their IPOs, Visa and MasterCard were JVs that set interchange pricing that has been challenged in an antitrust lawsuit.

Visa's Image-making: Marketing or Legal Defense?

December 30, 2009

Analysis of:Visa's Image Overhaul - US Banker Article | www.americanbanker.com

The article notes that Visa's new ads are the first of their kind since its IPO 2 years ago. Their goal is to influence the outcome of the interchange wars with its merchants (before Congress and in court) and to cause public and private sector VIPs to recognize that it is not an issuer of bad old credit cards. The ads do not state why it took Visa so long to put on a better face.

Is federal banking preemption a benefit or trap for banks?

December 11, 2009

Analysis of:House Deal Bolsters Defense of Preemption - American Banker Article | www.americanbanker.com

The banking reform bill in Congress will include a provision to almost totally preempt the application of state law to federally chartered banks, like Chase, Wells, Citi, et al. Its sponsors have offered it to soften banking resistance to other parts of the bill (e.g., the creation of a super-consumer protection agency). Preemption protects banks from balkanization by patchworks of conflicting and overlapping state statures. As such, it allows for greater cost predictability.

What GAO card study means to interchange legislation & NY lawsuit.

November 20, 2009

Analysis of:GAO: Let Card-Fee System Stand | online.wsj.com

The GAO study of bankcard interchange fees is a mixed bag for the industry. It upholds the practice (in contradiction to the lawsuit against the practice in New York) but points to numerous ideas about how its excesses can be reduced. The latter could propel the Welsh bill in Congress toward enactment. It would allow merchant actions to pressure issuers to accept lower interchange fees. The study's ideas could also play a role in crafting a settlement of the NY suit.

Populist Politics Threaten Card Industry Recovery & Survival

November 19, 2009

Analysis of:US Credit Card Sector Faces Punitive Hostility | www.ft.com

The letter in today's FT (I am one of the authors) questions whether new and proposed legislation by Congress can kill the credit card industry.

Retail discounts won't revive our economy

November 9, 2009

Analysis of:Catering to the Recession Mentality | online.wsj.com

The article is about the struggle of retailers to lure consumers to stop worrying about the economy and start spending again. Their bait is aggressive discounting. The question not only is whether it will work but whether other factors will wipe out the best laid discounts.

Loss of arbitration of cardholder disputes could sink card industry

October 15, 2009

Analysis of:Turmoil in Arbitration Empire Upends Credit-Card Disputes | online.wsj.com

Although the article is about an investor's failed bet on arbitration of card disputes, the bigger fail will belong to the card industry -- the 1 billion bank and private label cards held by 200 million consumers. Issuers of those cards have all but lost the right require arbitration and the enormous protection arbitration brings against class actions. With the NAF gone kaput and the AAA refusing to fill the void, issuers now face massive, potentially crippling new risks .

Threats to make CARD Act worse and to regulate interchange fees

October 6, 2009

Analysis of:Banks Face Pressure to Bend on New Agency - American Banker Article | www.americanbanker.com

The article is about the wrangling in Congress to enact a so-called "Consumer Protection Agency." But it carries a threat to bankers. If they don't stop trying to block a CPA, Congress will enact piecemeal bills that will prevent card issuers from being able to reprice in response to the CARD Act and will regulate interchange pricing downward.

Bankcard industry lobbies Congress to leave interchange fees alone

September 22, 2009

Analysis of:Lafferty Group - Interchange battle rages on | www.lafferty.com

The primary story here is not the card industry's standard defense of bankcard interchange fees. It is that Visa and industry trade associations are responding to the clear and present danger that an angry Congress is going to side with merchants by enacting a law to limit interchange fees. Their defense of the fee is that polling of consumers shows a wide majority in favor of charging merchants for accepting cards. But it doesn't address whether current fees are too high and unfairly applied.

Bank stocks will crumble in the coming months

August 14, 2009

Analysis of:Stocks Slip as Banks Pull Back | online.wsj.com

The WSJ article suggests a modest, temporary pullback for banking stocks amidst all the recent glowing reports that the Great Recession is over. It is not over. It is going to get much worse, precisely because of a crisis that is about to erupt for the bankcard industry.

Turmoil at Visa or a hopeful turn in the road?

July 28, 2009

Analysis of:Visa Says Its President Steps Aside | online.wsj.com

The termination of Visa's president reflects the crisis in the bankcard industry. Since its IPO, investors, issuers and merchants been waiting for Visa to lead the industry to new heights. That has not happened. In fact, things have gotten worse. Cardholders, merchants, Congress and states are in rebellion against the industry, which has all but given up on innovation.

Is interchange protection a Custer's last stand for the bankcard industry?

July 16, 2009

Analysis of:JPMorgan's Profit Soars Despite Downturn - NYTimes.com | www.nytimes.com

The article reveals the growing, almost populist attack against bankcard interchange pricing.  Heretofore, merchants have challenged the fee via lawyers, lobbyists and trade associations.  Now it is trying to enlist cardholders, as if taking advantage of the enormous public distrust of banks and card issuers.   The industry appears to be digging it its heels, perhpas reflecting a fear that issuers cannot absord any additional revenue losses without signifigantly and permanently damaging the product, not to mention the bankcard systems.  The new CARD Act forces the industy to absorb tens of billions in new costs and restricted revenue streams.  Doing the same on interchange could be more than banks can handle.

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