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Several forces would contribute to both VISA and MC changing fees at the same time. - the typical open and transparent "price signaling" where competitors can

by jasode 8y ago

Several forces would contribute to both VISA and MC changing fees at the same time. - the typical open and transparent "price signaling" where competitors can "see" others' price changes. Similar to one airline immediately changing (matching) a ticket price in response to another airline lowering or raising its price. Same mechanism as Amazon bots constantly web scraping Best Buy and Walmart and Best Buy in turn scrapes Amazon. Everybody is constantly monitoring everybody's prices. - Visa and MC have overlap of owners[1][2]. 4 out of the top 5 owners are the same for both: Vanguard, Blackrock, FMR, State Street - Visa and MC have overlap of member banks that also have minority ownership Yes, you were being sarcastic about the coincidence but it seems like the natural economic equilibrium is for both to have near identical network fees. [1] Visa top 5 institutional stockholders: https://www.nasdaq.com/symbol/v/ownership-summary https://www.nasdaq.com/symbol/v/ownership-summary [2] MC top 5 institutional stockholders: https://www.nasdaq.com/symbol/ma/ownership-summary https://www.nasdaq.com/symbol/ma/ownership-summary

chrisbolt 8y ago
The overlap of owners means nothing, as those are mutual funds or ETFs that are the top owners of most stocks on the market.
- sjjshvuiajhz 8y ago
  It seems relevant - if company leadership is attempting to act in the best interests of the shareholders, the fact that the shareholders also own their competitors would tend to bias them against engaging in a price war (even one that they would have a good shot at winning).
- prickledpear 8y ago
  These mutual funds and ETFs actively participate in corporate governance, and the overlapping ownership of most stocks in the market is a very underrated problem. Economists have found evidence that as ownership concentration increases, firms act more like a monopoly. See this paper for one example in the airline industry: https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12698 https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12698
  - nebolo 8y ago
    Participating in corporate governance and actively forming corporate strategy is a very different issue. And to my knowledge, ETFs and mutual funds do not participate in any meaningful way in management, i.e. they do not act as activist investors.
    - jasode 8y ago
      >And to my knowledge, ETFs and mutual funds do not participate in any meaningful way in management, i.e. they do not act as activist investors. There's been a trend towards more activism with passive indexes. One example with Blackrock's passive fund: https://www.afr.com/business/larry-fink-says-blackrock-will-take-activism-to-a-whole-new-level-20171031-gzc2lt https://www.afr.com/business/larry-fink-says-blackrock-will-...
- currymj 8y ago
  there’s an ongoing debate about whether this situation actually does pose an antitrust problem across many industries. it’s at least not totally implausible.
theshortofit 8y ago
IMHO, the Card Brands are an Oligopoly Industry so they have pricing power and therefore raise prices because they can. Add on the fact they are public companies with their investors ( your list) hounding them for better returns leads to price increase abuses.
theshortofit 8y ago
Good post!

by jasode 8y ago

chrisbolt 8y ago

The overlap of owners means nothing, as those are mutual funds or ETFs that are the top owners of most stocks on the market.

sjjshvuiajhz 8y ago
It seems relevant - if company leadership is attempting to act in the best interests of the shareholders, the fact that the shareholders also own their competitors would tend to bias them against engaging in a price war (even one that they would have a good shot at winning).
prickledpear 8y ago
These mutual funds and ETFs actively participate in corporate governance, and the overlapping ownership of most stocks in the market is a very underrated problem. Economists have found evidence that as ownership concentration increases, firms act more like a monopoly. See this paper for one example in the airline industry: https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12698 https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12698
- nebolo 8y ago
  Participating in corporate governance and actively forming corporate strategy is a very different issue. And to my knowledge, ETFs and mutual funds do not participate in any meaningful way in management, i.e. they do not act as activist investors.
  - jasode 8y ago
    >And to my knowledge, ETFs and mutual funds do not participate in any meaningful way in management, i.e. they do not act as activist investors. There's been a trend towards more activism with passive indexes. One example with Blackrock's passive fund: https://www.afr.com/business/larry-fink-says-blackrock-will-take-activism-to-a-whole-new-level-20171031-gzc2lt https://www.afr.com/business/larry-fink-says-blackrock-will-...
currymj 8y ago
there’s an ongoing debate about whether this situation actually does pose an antitrust problem across many industries. it’s at least not totally implausible.

theshortofit 8y ago

IMHO, the Card Brands are an Oligopoly Industry so they have pricing power and therefore raise prices because they can. Add on the fact they are public companies with their investors ( your list) hounding them for better returns leads to price increase abuses.

theshortofit 8y ago

Good post!