The Proposed Rule Aims to Promote Competition Through Increased Choice to the Benefit of Consumers, Merchants, and the Economy 

August 11, 2021 - Today, the Justice Department’s Antitrust Division filed a comment in support of the Federal Reserve Board of Governors’ (Board) notice of proposed rulemaking on Debit Card Interchange Fees and Routing. The Board’s proposed rule would require banks that issue debit cards (“issuers”) to give merchants a choice of debit networks for transactions made online and in circumstances where consumers pay without physically presenting their debit cards. By introducing choice, the proposed rule has the potential to reduce merchants’ transactional costs and ultimately save consumers money.

“We commend the Board for its efforts to promote competition in this important part of the debit card industry by ensuring that smaller debit networks will have a greater ability to compete for merchants’ business,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “There is limited competition to process online and other card-not-present debit transactions — which in 2019 accounted for over $1 trillion in transaction value. Consistent with President Biden’s Executive Order on Promoting Competition in the American Economy, the department looks forward to working with the Board on this and other efforts to foster competition.”

Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Durbin Amendment”) requires issuers to make available at least two independent debit networks on the cards they issue so that merchants have a choice of debit networks when processing debit transactions. But this requirement has not been effective for online and other card-not-present transactions because many large issuers have not implemented necessary technological changes to permit debit networks other than Visa and Mastercard to process transactions. The Board’s proposal would clarify that the Durbin Amendment’s two-debit-network requirement applies with equal force to such transactions.

The department supports the Board’s proposed rule because it has the potential to increase competition by lowering one of many barriers to entry and expansion that new or smaller competitors face in this important segment of the debit card industry. At the same time, the department encourages the Board to consider whether there may be ways to improve upon the proposal. Specifically, the Board should consider whether the proposal is drafted broadly enough to capture all card-not-present transactions. In addition, incumbent industry participants may attempt to circumvent the proposed rule. Accordingly, the department encourages the Board to actively assess additional ways the proposed rule may be enhanced to increase competition for debit payment processing.

The Board is responsible for prescribing regulations pursuant to the Durbin Amendment, a statute designed to promote competition in the debit card market.