The days of airlines, taxis and hotels hitting consumers with credit card processing surcharges as high as 10 per cent of a purchase price could soon be numbered.
The Reserve Bank of Australia, which regulates the payments system, gave its strongest hint yet yesterday that it could give card networks including MasterCard and Visa the power to cut off merchants who dress up price gouging as processing fees.
It is hard to know whether this should be taken seriously. But there are some comments worth making if it is even remotely true.
First, the RBA were well-aware that surcharging above the costs to the merchant of credit cards was likely. It was a clear implication of economic theory. In addition, CabCharge had been doing just that for years. So this is hardly an unexpected feature of the reforms.
Second, one of the main points of the reforms was to give merchants power over card networks. One way they can exercise that power is to surcharge above their own costs. So why would you want to punish them for doing that?
Third, I thought we didn’t like retail price maintenance but this type of suggestion is consistent with liking retail price maintenance and empowering it. Of course, this is to keep a price down unlike the case with milk where the government appears to want to keep the price up!