Representative Ted Budd (R-NC) spoke on the House floor on the importance of preserving the Durbin Amendment repeal in the Financial Choice Act. Two weeks ago, the Financial Choice Act passed the House Financial Services Committee with a full repeal of the Durbin Amendment included. Pro-price control groups are fighting to strip the provision through a procedural technique in the House Rules Committee, a closed-door process that, if successful, will not allow Congress to sidestep a public debate on the policy. Read Rep Budd’s full remarks below. Watch his speech here.
Right now, we’re having a fierce debate in the Republican Conference over the Durbin Amendment, which is a price control on debit swipe fees. Retailers have claimed that the Durbin Amendment is about competition. They’ve claimed that it’s about restoring a broken market. They’ve claimed that Visa, MasterCard and issuing banks are engaged in price-fixing on swipe fees.
This is the key element of this debate. A vote to keep the Durbin Amendment is a vote that rests on the idea that members are sure that there is price fixing in the debit card market. There’s six to eight billion dollars per year at play here, and the violation of a core free-market principle: the notion that government should not be telling people what they can or can’t charge. My point would be that if you do that, if you support that degree of command and control in the economy, you have got to be sure.
And should we be sure?
I go back to the Sherman Antitrust Act, which outlaws price fixing. This is a criminal law. Hundreds of people have been put in jail for it. You can go to jail for up to 10 years for violating it, and the law has stood for more than 100 years.
Payment networks and retailers have been fighting over whether or not Visa, MasterCard and issuing banks are violators of the Sherman Antitrust Act for thirty years—one of the earlier rulings goes back to 1986. There’s ongoing litigation right now. In fact, there’s more than 15 different cases out there on this.
Litigation I would add, that the retailers have never won when cases went to trial. In the major cases that we’ve managed to find they are 0 for 3.
They’re actually in the middle of another big case now. There was a settlement, and later a higher court set it aside. A sentence of that ruling reads, “Discovery included more than 400 depositions, 17 expert reports, 32 days of expert deposition testimony, and the production of over 80 million pages of documents.”
80 million pages. I have studied this issue for months, and I have not read 80 million pages. I am a retailer, and I’ve paid tens of thousands of dollars in swipe fees. I know the difference between Point of Sale and Square Mobile Payments. I’ve used these systems. I still do not know. That’s why I oppose the Durbin Amendment: because I am not sure that this price control is necessary, and before I put the federal government in the role of judge, jury and executioner for the payment industry, I would have to be sure.
I know the government wasn’t sure when they came up with the regulation. They originally came up with 12 cents a transaction. Then the final rule came in at roughly 24 cents. Were they right the first time? Were they wrong the second time? There’s no way to know for sure.
I guarantee you that when we walk down to the floor and vote on this issue, and choose to uphold a policy which many free-market think tanks have said harms consumers, that members will not have read 80 million pages. If we’re honest with ourselves, most will not have read 80 pages. There’s no way we could, given everything that’s in front of the federal government, even if we wanted to.
The economist F.A. Hayek got at this in his criticism of the planned economy. He said that socialism doesn’t work because of what he called “the unavoidable imperfection of man’s knowledge.”
Hayek was referring to human beings at large. I’d offer that the knowledge of politicians, speaking for myself in particular, must be that much more imperfect.
You don’t have to believe that the banks are angels and you don’t have to disbelieve the retailers to oppose the Durbin Amendment.
You just have to have to feel a little bit of doubt either way.