Rubber hose attack

[lynn.wheeler at firstdata.com]

the following from a thread on some of the fees related to fraud issues at

http://lists.commerce.net/archives/internet-payments/200110/maillist.html

specifically from a thread on Visa/MasterCard Antitrust Comments.

Here's an interesting quote taken directly from Judge Barbara Nelson's
decision (the full text of the decision is available at:

<http://home3.americanexpress.com/corp/doj/crt_dec_011009.pdf>):

"Defendants' ability to price discriminate also illustrates their market
power.

Both Visa and MasterCard charge differing interchange fees based, in part,
on the degree to which a given merchant category needs to accept general
purpose cards.

Transactions with catalog and Internet merchants, for example, which rely
almost completely on general purpose cards, have higher interchange fees
than 'brick and mortar' merchants.

Defendants rationalize this difference by pointing to increased fraud in
these merchant categories, but this explanation is belied by the fact that
the Internet merchant, not Visa/MasterCard or their member banks, bears
virtually all the risk of loss from fraudulent transactions.

Even today, Amazon's fraud rate is lower than mail-order companies, yet it
is charged (indirectly, through the merchant discount) the same interchange
fee as these mail order companies.

The reality is that Visa and MasterCard are able to charge substantially
different prices for those hundreds of thousands of merchants who must take
credit cards at any price because their customers insist on using
those cards."




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