This summer, the Federal Trade Commission (FTC) requested comments on any contract terms that may harm competition. In response, NACS filed comments urging the agency to look at the global card brands, Visa and Mastercard, which use their contract agreements to block out competitors.

While there are more than a dozen payment networks in the United States, Visa and Mastercard have historically blocked smaller competitors such as Star, NYCE, Shazam, Accel and Pulse, among others, from competing with them for credit card transactions. This behavior preserves their market dominance, drives up the swipe fees retailers pay and inhibits innovation in the payments marketplace.

Payment cards are issued by banks who have chosen what network will be on the card. In Visa and Mastercard’s contractual terms, any bank that uses their networks is prohibited from allowing those credit card transactions to be handled by competing card networks. NACS argues that forcing such exclusivity “inhibits competition for credit card network services and removes competitive market dynamics that might otherwise exist for credit card transactions.”

In 2010, Congress addressed the issue of network competition on debit cards with the passage of the Durbin Amendment, which requires issuing banks to enable two unaffiliated networks on debit cards. The networks have tried to circumvent these nonexclusivity provisions, especially on internet and many gas pump transactions, and the FTC and Department of Justice are investigating actions that undermine debit network competition. But Visa and Mastercard provisions preventing network competition for credit card transactions have not yet been the subject of regulatory scrutiny and action.

“The time has come for such action because credit card network exclusivity continues to undermine competition, and financial institutions that issue credit cards should have the option to contract with multiple networks whenever they find such arrangements to be beneficial to their businesses. Any and all contractual provisions preventing that freedom to contract with competitive networks should be removed,” NACS states in its comment letter.

The emergence of new technologies in payments has the potential to dramatically open competition. Transactions do not have to be bank-to-bank; they are also consumer-to-consumer. Consumer-to-merchant should be just as easy. The rapid pace of innovation is opening up more payment options than ever before, yet the contractual terms of the dominant networks preserve their market power at the expense of competition. NACS is making clear that it’s time for regulators to address this monopolistic behavior.