Law Prof. Defends Swipe Fees

June 10, 2010 

Todd Zywicki, a professor of law at George Mason University and a scholar at the institution’s market-oriented think tank the Mercatus Center, recently released a paper in support of swipe fees. The Economics of Payment Card Interchange Fees and the Limits of Regulation argues merchants’ contention that the fees are unfairly high doesn’t take into consideration the real value they derive from accepting payment cards. He also posits that government intervention will result in unintended consequences detrimental to consumers and the fact that political solutions to market-oriented problems are fraught with complications. “Critics of interchange fees argue that the government should intervene to reduce those fees. This ignores the extreme difficulty of devising workable political interventions in a system as interdependent and complicated as payment card systems, especially when those interventions would engage in price-setting of the interchange fee either directly or indirectly.” In addition to teaching at GMU and serving as a visiting lecturer at Vanderbilt, Georgetown and Boston College in recent years, Zywicki spent a year serving as director of the office of policy planning at the Federal Trade Commission and has testified before Congress on several occasions regarding financial reform and consumer protection.