Wednesday, 6 July 2016

Consumerist Madness - EU trying to justify itself?


We know no facts from the article, so we need to deduce what's going on.

Yes, credit card companies (and debit card suppliers) charge the retailer a fee for CC/DC transactions.  And of course such a cost is added to the cost of supplying goods or services. What is wrong with that?  All costs of sales are added into the sale price of any good or service. Maybe it would be more transparent to add these transaction charges to our CC bill.  Of course the seller would still charge the same market clearing price for the good or service, but we might be less likely to buy on CC's quite so frequently.

Are these fees charged by the CC/DC companies 'too high'?  As long as their is a competitive market in supplying such services, no.   So just why is the EU getting involved in price fixing?  It cannot know the 'right price'. Furthermore it is the EU's rampant regulationism which proto nationalises retail banking that actually restricts competition.

In any event the use of credit is actively encouraged by all governments including the EU to boost consumption,(on the flawed premise that this boosts the economy).  So the CC companies probably have more money floating about than they know what to do with.

Walter Merricks has a long history of consumerist failure like this.  I think he's just looking for work, again.

Classic consumerist nonsense and the bureaucratic technique of creating a non problem which allows them to justify their existence and concentrate benefits and distribute costs.


Bayard said...

"So just why is the EU getting involved in price fixing?"

Because bureaucrats, and especially left-wing bureaucrats, think they knoiw the "right" or "fair" price for everything.

Mark Wadsworth said...

Credit card companies clearly have some sort of monopoly position, or else they wouldn't get away with it.

But businesses know that they can sell far more if they allow people to pay by credit card, so really, they don't mind losing 5% of turnover in charges if their turnover is X% higher than otherwise.

Some businesses refuse to accept credit cards, some won't even take debit cards, fair play to them.

Dinero said...

On the face of it it’s slightly incongruous where people using “cashback” “reward” , credit cards get the credit card usage charge back from the credit card company, and people using cash in the same shop don’t get a cash discount so the person using a credit card does not pay for using the credit card but the person using cash is paying the credit card usage charge when they are using cash. Of course that a simplification of how the supermarkets costs are paid for in supermarkets.

Mark Wadsworth said...

Din, that baffles me slightly.

Instead of stinging the retailer for 5% and offering the consumer 1% cash back, why doesn't that company tell the retailer he'll only sting him for 4%? Surely the retailer would then choose that company?

Dinero said...

Well in practice, retailer's don't choose which cards they take.

Mark Wadsworth said...

D, true, but they could if they wanted.

Derek said...

I think that there's an element of moral hazard here too. The credit card charge can increase the product price or it can reduce the retailer profit. Which it does is a matter of incidence, just like tax incidence and hence depends on the supply/demand curves for the product(s) being sold. But it does mean that a retailer selling product(s) that allow him to pass the charge on to the customers is going to behave differently from a retailer who has to bear the card cost himself.

Lola said...

D Yes. My preference is for the retailer to disclose the CC fee as a separate item in the bill, preferably pre sale. E.G.:-
Shirt £20 + 20% VAT (£4) + 5% Cc fee (£1.20p) = £25.20

That's what I'd do if I was a shopkeeper. And FYI it's what I sort of do now for my business.

The problem is that Banks charge retailers for depositing cash. (I think that the market might solve that. Set up a business that accepts cash at a low fee and remits the payment to your bank as one transfer.)