GLG News by Credit Card Experts

Duncan MacDonaldConsultantDuncan McDonald

Is MasterCard's deal with the EC on interchange fees a global surrender on their legality?

April 2, 2009

Analysis of:Financial Times FT.com | www.ft.com

MasterCard's concessions on intra-EU interchange fees with the EC concedes the authority of the EC to regulate its and Visa's pricing practices.  Although yesterday's concessions cover only about 5% of all EU interchange fees, it will be next to impossible for MCI to avoid further and broader concessions.  In effect, MCI has conceded that its long held legal position is on shaky grounds.  Proof of the pudding is that it has given up an estimated $2B in the fees at a time when the weakened banking system desperately needs every penny it can get.  Perhaps it made a guess that governments will make up the shortfalls with taxpayer donations to the banks.  But that's doubtful in light of the extreme and growing popular resentment of bank bailouts.  In any case, MCI's surrender will severely weaken any defense Visa had in its arsenal.  It will also weaken their collective defenses in the New York court.  As such, it points the way toward a large settlement of the case within a year.

Richard BialekChief Executive Officer Bialek Group

TALF - Implications for Credit Card Issuers

March 12, 2009

Analysis of:Press Release: The Federal Reserve Board Announces the Creation of the Term Asset-Backed Securities Loan Facility (TALF) | www.federalreserve.gov

This program will be a benefit for the large credit card issuers: JP Morgan Chase, Citicorp, Bank of America, American Express, Discover and Capitol One, all of whom can position themselves as a high quality, AAA rated, source of new loans. TALF could prove to be especially helpful to American Express, Discover and Capital One, credit card issuers who lack the branch network and deposit base of the big money center banks. TALF could open up a funding source by reviving the credit card securitization market.

Duncan MacDonaldConsultantDuncan McDonald

Looming bankcard financial crisis undermines merchant interchange threats in US & EU

December 3, 2008

Analysis of:America must keep consumer liquidity flowing | search.ft.com

Meredith Whitney's prediction of an impending liquidity crisis for the bankcard industry is bad news not only for profit strapped banks but also merchants whose survival depends on card transactions.  To revive faltering economies by getting consumers to spend again, bank regulators in the US and EU are unlikely to ignore merchant demands for massive reductions in interchange fees -- especially after infusing hundreds of billions of capital into the banking system.  A more likely result is that they will oblige the bankcard industry by taking efforts to support the interchange status quo.

Duncan MacDonaldConsultantDuncan McDonald

Canadian regulatory decision weakens merchant interchange claims in New York lawsuit

December 2, 2008

Analysis of:The Competition Bureau's Letter to Financial Institutions — Duality and Dual Governance of Credit Card Networks in Canada | www.competitionbureau.gc.ca

A recent decision by Canada's Competition Bureau strengthens the defense of the bankcard industry in the interchange lawsuit in New York.  In reversing a long standing rule that prevented banks in Canada from issuing Visa and MasterCards. the decision concluded that the restructuring of Visa and MasterCard as independent companies has eliminated the risk that issuers can govern network decisions in violation of antitrust principles.  The reasoning of decision could persuade the judge in New York that the "market power" and collusion arguments of the merchants are no longer valid.    

Duncan MacDonaldConsultantDuncan McDonald

Is unionization banking's biggest risk in '09?

November 7, 2008

Analysis of:Labor Wants Obama to Take on Big Fight | online.wsj.com

President-elect owes Big Labor a bone for its enormous support in getting him elected and Labor wants enactment of the Employee Free Choice Act more than any other political favor.  The odds would seem to favor Labor, but in turn would spell disaster for the business community.  For the first time in history, unionization of banks will become not only a distinct possibility but a strong probability.  Keep in mind that many banks in countries like France have unions.  If bank unions come to pass, what will that mean to their recovery from the credit crisis and their operations, products, service, cost management, legal status, etc.?

Duncan MacDonaldConsultantDuncan McDonald

New Administration's Hobson's choice on bank-merchant dispute over card interchange fees.

November 6, 2008

Analysis of:Small-Business Owners Lobby to Cut Credit Card Fees | www.nytimes.com

Public anger against banks, coupled with merchant anger against bankcard issuers, will force the Obama Administration and Congress to consider legislation to resolve the merchand-card industry impasse on how, if at all, interchange fees should be calculated.  While policy makers on the one hand will not want to jeopardize revenue streams that banks desperately need to stabilize their balance sheets, on the other they cannot ignore bank charges that could put hundreds of thousands of small merchants out of business, putting an even larger number of their employees on the bread line.  The pressure of the issue could force them into a Solomon solution that creates a federal commission to regulate the fees.  A recent House bill awkwardly tried to do that and surely will be dusted off and cleaned up for further consideration.  How disruptive will might a legislative be?

Duncan MacDonaldConsultantDuncan McDonald

What the bankcard Discover settlement means to merchant interchange lawsuit

October 29, 2008

Analysis of:Morgan Stanley, Discover Fight Over Visa, MasterCard Proceeds | online.wsj.com

Visa & MasterCard's $2.75B settlement of the antitrust suit against them by Discover should have relevance to the interchange lawsuit against them by their merchants.  It suggests either great vulnerability to the merchants or a strategic act by the networks to remove Discover as a distraction.  Going forward with trials in the American Express and Discover suits risked high damage awards and court decisions that could help the merchants.  As such, the settlement amounts for both cases might be a small price to pay to prevent an even larger risk on interchange, which after all involves demands not only for tens of billions in damages (to be trebeled) but also deep cuts of interchange fees going forward.

Duncan MacDonaldConsultantDuncan McDonald

Nationalization of banking might save bankcard interchange pricing

October 16, 2008

Analysis of:Bail-outs test EU rules on state aid | www.ft.com

The article underlines the extent to which governments will go to retrun banks to profitability.  Accordingly, EU policy makers will not enforce  state aid laws that would otherwise prohibit capital infusions into local banks by state regulators and will favorably consider less aggressive global warming measures.  It should follow from its efforts to protect banks and commerce in general that the EC will suspend -- for an extended period -- its current effort to reduce merchant interchange fees that Visa & MasterCard collect for issuing banks.

Duncan MacDonaldConsultantDuncan McDonald

ARS class actions have no class

September 12, 2008

Analysis of:ARS collapse giving rise to class-action lawsuits | www.financialweek.com

It should be no surprise that the subprime/ARS collapse has generated waves of class action lawsuits by shareholders.  And that they appear to have merit.  But that doesn't mean courts will give the plaintiffs the WMD of a class action status.  Ten years ago that would have been a certaintly; today it is increasingly a rarity.

Duncan MacDonaldConsultantDuncan McDonald

DoJ brief in telecommunications case might help bankcard interchange defense

September 10, 2008

Analysis of:DoJ brief in telecommunications case might undermine merchant claims against bankcard industry | www.usdoj.gov

The DoJ amicus brief to the Supreme Court in a telecommunications case hints at a more relaxed view about the applicability of antitrust law to pricing decisions by regulated companies.  A key accusation in the bankcard interchange cases is that competing regulated banks on Visa & MasterCard's boards fixed the interchange fee and thereby harmed competion in violation of the law.  The DoJ recently took the argument in its brief a step further by proposing new antitrust guidelines that similarly relax traditional doctrines governing tie-ins, market power, illegal competition practices, monopilization, pricing, etc.

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