NRF Blames Banks for Harms of Federal Price Controls on Credit Cards

Surprise, surprise: price controls have harmful economic effects. Unfortunately, rather than condemn price controls, the National Retail Federation is calling for more. In his detailed, informative article for theDenver Post, David Migoya reports that the Dodd-Frank federal price-control law has actually resulted in higher fees for businesses that sell mostly low-cost items, impacting (among others) small restaurants and Redbox.

Following is my letter to NRF:

Dear NRF,

I was shocked to read that one of your employees, Craig Shearman, is blaming the banks for the inevitable harms of federal price controls on credit cards.

Price controls are both immoral and economically destructive because they forcibly prevent people from voluntarily negotiating contracts. Yet, rather than condemn the federal government’s price controls, Shearman called for even stricter controls!

Here is the key section of the Denver Post article:

“They failed to set something specific on small-ticket pricing, so as not to be more than was previously charged,” saidCraig Shearman, vice president of government affairs at the federation. “And banks being banks, there was a loophole, and they’re taking advantage of it. What was intended to be fair to all businesses is now a way to gouge small-ticket merchants.”

Your organization claims to represent retailers. But you cannot ultimately help retailers except by fighting for a free market. If you advocate government controls, those controls will inevitably expand to hurt the very people you claim to represent. I urge you to change course, condemn price controls, and champion economic liberty.

I welcome your reply, which I will cite publicly.

Ari Armstrong

Update: Mallory Duncan sent me a reply:

Dear Mr. Armstrong – Thanks for your comments. We absolutely agree that transparent and competitive markets are best. It is how retailers operate. It is how we compete to deliver low prices and ever increasing value for our customers.

Unfortunately, until recently, there has not even been the inklings of a competitive market in debit cards. Before the new law took effect, every single bank (all 7,000 of them) and their respective card associations charged exactly the same high schedule of swipe fees to every single merchant, regardless of size or service, and categorically refused to negotiate with any of them. Faced with a dominating price cartel, moving bad actors toward a competitive market requires either litigation or law. Fortunately, those efforts are beginning to work.

Despite some banks’ attempts to create loopholes, in time, even the small ticket fees mentioned in the article will become more transparent and competitive. That will be a good thing.

Mallory Duncan

Following is my reply:

Dear Mr. Duncan,

I sincerely appreciate you taking the time to reply.

Unfortunately, your reply does not address my concerns. You use the phrase “competitive market” as a euphemism to mean a market in which you force banks to do your bidding. The proper, moral, economically best system is a *free* market, in which parties are free to transact on a strictly voluntary basis. Again, when you advocate the use of force, you inevitably subject your own clients to the same threat.

Certainly anticompetitive banking controls should be repealed, and working toward that end should be your goal. But two wrongs do not make a right, and imposing price controls only further violates people’s rights.

Moreover, price controls are economically destructive by their very nature, and they inevitably produce unintended harms. If you are successful in closing the “loopholes” that concern you, the price controls will only cause harm elsewhere.

I again urge you to rethink your position, stop justifying your advocacy of force with clever euphemisms, and advocate economic liberty.

Ari Armstrong