Timothy P. Carney: Dems push welfare for Wal-Mart in financial bill

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Wal-Mart gets grief from unions, activists, journalists, and politicians for using market clout to get lower prices from suppliers and employees. So Wal-Mart has changed its ways. Now it uses big government to get lower prices from debit card companies.

Sen. Dick Durbin, D-Ill., is leading the charge, in the name of consumer protection, to regulate the financial arrangement between debit card issuers (banks and credit unions, mostly), card networks (Visa and Mastercard), and retailers. In the Senate's financial regulation bill, Durbin has inserted an amendment empowering the Federal Reserve to set debit card "interchange fees" -- the small percentage of each purchase the banks and card companies pocket.

If Wal-Mart had its druthers, the interchange fee would be zero. If Visa and the banks had their way, the interchange fee would be 100 percent. Of course, those extreme cases are impossible, because one of the parties would simply decline to participate.

Instead, as with all voluntary business dealings, a price structure is agreed upon that may please some parties more than others, but which all parties have evidently decided is better than no deal at all.

Retailers have long resented the hand the market has dealt them: They think the current interchange fees are unfairly high, but they know they'll lose business if they stop taking credit and debit cards.

Luckily for retailers, in these days of ever-increasing government, undesirable free-market realities have an easy solution: lobbying.

Lobbying filings show that Wal-Mart, to get the price "right," has dispatched the K Street firm Patton Boggs and a squad of in-house lobbyists, including Ivan Zapien. Zapien was outreach director for the House Democratic Caucus and then chief of staff for Sen. Bob Menendez, who is the top fundraiser for Senate Democrats.

Carrying the flag for all retailers seeking price controls is the Retail Industry Leaders Association, a D.C. lobby.

The credit card companies and issuers have fought back. Visa has hired D.C. consultants to pitch their case (which helps explain why you may have seen so many articles on this topic), and the credit union lobby is starting a full-court press, too.

The Credit Union National Association says it has brought 1,000 representatives of the industry to Capitol Hill to oppose the Durbin amendment, and also solicited more than 400,000 calls and e-mails to Congress on the issue. CUNA also pleads its case to me and other journalists.

On one score, credit unions are an obvious frontman in this fight: Visa and Mastercard, hardly paupers, might not be the best sympathy case. Big banks, also, are not the most popular group at the moment. Credit unions are nonprofits, and liked by their customers.

Democrats, sensitive to this dynamic, changed the bill to protect credit unions and smaller banks, exempting debit cards from the price controls if the issuer has assets less than $10 billion. The credit union lobby is unsatisfied, arguing that retailers will simply stop taking the small-bank cards with higher rates -- unless the small banks and credit unions also cut their interchange fee.

Durbin spokesman Max Gleischman responded, "We don't think that their concerns are particularly serious at this point."

Of course, the credit cards companies and banks also use big government as a weapon here: Anti-trust regulations bar retailers from collectively bargaining for lower interchange fees. Visa and banks oppose an anti-trust exemption for the retailers.

The battle over interchange fees is just one of many regulatory rumbles in which Wal-Mart is engaged -- on both offense and defense. The Wall Street Journal reported this week on Safeway and other stores bankrolling local "grass-roots" efforts to keep Wal-Mart from opening.

Wal-Mart last year supported the employer mandate in Obama's health care measure, which will hit smaller retailers much harder -- and every competitor is smaller than Wal-Mart.

This is what big government does. Competition is now less about pleasing investors, and more about begging politicians.

Timothy P. Carney is The Washington Examiner's lobbying editor. His K Street column appears on Wednesdays.

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