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ARLINGTON, Va. -- Steven C. Smith, president and c.e.o. of Abingdon, Va.-based K-VA-T Food Stores, Inc. and chairman of the board of Food Marketing Institute (FMI), testified yesterday on interchange and other anti-competitive practices of credit card companies in a hearing before the U.S. House of Representatives Judiciary Committee Antitrust Task Force. The hearing marked a new milestone in the interchange fees debate, which was taken up by the Senate last July.
"Conventional wisdom tells us that as volume grows prices should fall, but instead credit card companies have created much greater volume and raised fees and costs substantially," said Smith in his testimony. "This is contrary to the basic concepts of the American free enterprise system."
For its part, the National Grocers Association submitted a written statement to the House Judiciary Antitrust Task Force applauding the hearing.
Visa and MasterCard control 80 percent of credit card purchase volume. Each company works with their member banks to collectively set the price of interchange fees. Because banks benefit from higher interchange fees, Visa and MasterCard compete to charge the highest rate.
"This hearing shows that a broken market exempt from normal competitive checks and balances hurts retailers and consumers," said Tim Hammonds, FMI president and c.e.o. "Visa's and MasterCard's current practice of forcing these exorbitant hidden fees on Americans is no longer defensible."
Americans are paying the highest interchange fees in the world, which have risen 117 percent since 2001, reaping more than $36 billion for credit card companies, according to FMI's statistics. These fees are hidden charges on merchants every time a credit or debit card is used to pay for a purchase
Investigations by both judiciary committees in Congress, along with future hearings expected in this Congress, could very well lead to a push for legislation to provide significant relief to consumers and retailers, according to FMI.