Card payment systems are complex and dynamic, and mostly regarded as two-sided markets. There is consensus in literature as to the fundamental elements of the structure of said markets: firstly, the existence of two groups of economic agents, the merchants and cardholders, requiring services from a platform with interdependent demands; secondly, the resulting network externalities from this interdependence; thirdly, the Non-Neutrality present in the price structure, and finally, the role of platforms within the market scheme.
Some of the difficulties that arise in these types of markets are associated with the assessment of the social efficiencies that are generated by the price structure of payment platforms and how to define interchange fees and charges and the potential antitrust issues that may arise, among others. For instance, understanding and assessing price distribution and the impact of externalities on price definition, may be challenging for both competition agencies and regulators, as the price structure in these markets affects the dynamics of the transactions that take place within the market.
The goal of the session is to dive into a series of key questions on the topic and to explore how enforcement and regulatory efforts have evolved recently. Some of the key questions that will be discussed are:
- How to best define interchange fees and is it desirable? in what contexts?
- How to assess the entrance into the market of non-financial agents that may rival financial institutions?
- What are the effects of fees and charges on incentives to innovate? What have been the approaches of competition and regulatory authorities to the assessment of these interdependencies?
- What has been the impact of regulation? What has been the impact of enforcement?
- Does competition law allow me to remedy, not only at the sanctioning level, but also at the preventive level identified market failures in the payment system?
- What has been the interplay between regulation and enforcement?
Background Note by the Superintendencia de Industria y Comercio (SIC) Secretariat • Call for contributions
Contributions from participants
Chile (FNE and TDLC)
Esteban Greco, Antitrust, Competition Policy and Regulation Economist Director, Global Economics Group and former president of the National Commission for the Defense of Competition in Argentina (CNDC) Bio
Beatriz Yemail, Director, Global Economics Group Bio
Rosa M. Abrantes-Metz, Practice Co-Leader, Global Antitrust & Competition - Brattle Bio
Suggested bibliography (Full bibliography available in the call for contributions)
- Innovación y disrupción digital en los mercados de medios de pago: el caso de defensa de la competencia en la Argentina by Greco, E. & Viecens, F., 2020
- Payment Cards, Two-sided Market, Interchange Fees. by Prager, R. A., Manuszak, M. D., Kiser, E. K., & Borzekowski, R., 2009,
- Externalities and regulation in card payment systems. Review of Network Economics, 5(1), by Rochet, J. C., & Tirole, J. (2006a)
- Competition and Payment Systems, OECD Best Practice Roundtables, 2012
- Two-Sided Markets, OECD Best Practice Roundtables, 2009
- Competition and Efficient Usage of Payment Cards, OECD Best Practice Roundtables, 2006
- The impact of price controls in two-sided markets: evidence from US debit card interchange fee regulation by Manuszak, M. D., & Wozniak, K., 2017
- The impact of the U.S. debit-card interchange fee regulation on consumer welfare, Journal of Competition Law & Economics, Volume 11, Issue 1, March 2015, Pages 23–67, by David S. Evans, Howard Chang, Steven Joyce
- MasterCard II: The Commission Pursues Its Antitrust Enforcement in Cross-Border Payments, Journal of European Competition Law & Practice, Volume 10, Issue 5, May 2019, Pages 297–300, by Sari Suurnäkki, Jaime Rodríguez-Toquero Aymerich
- Germany’s ‘Lex Apple Pay’: Payment Services Regulation Overtakes Competition Enforcement, Journal of European Competition Law & Practice, Volume 12, Issue 2, February 2021, Pages 68–81, by Jens-Uwe Franck, Dimitrios Linardatos
- An Event Study Analysis of the Impacts of the European Interchange Fee Regulation, Journal of Competition Law & Economics, Volume 17, Issue 1, March 2021, Pages 63–94, by Alen Veljan, Ali Roaidi
- Indirect network effects, usage externalities, and platform competition, Journal of Competition Law & Economics, Volume 15, Issue 2-3, June/September 2019, Pages 283–297, Paul A Johnson
Competition Law and Policy in Latin America
Full list of OECD Competition Policy Roundtables