Anatomy of How an Anticompetitive Monopoly Works

December 6, 2007

Late last week, I was asked to fly east to meet with the president of a leading multi-national conglomerate. Because of the short notice, rather than sitting up front, I chose to fly economy but forgot that many flights now charge for food. 

The lesson, however, was a good reminder of how anticompetitive monopolies work.  The onboard snacks were five-dollars and if you want to eat, that was the choice.  But, it was not the only choice, I could have brought food from home, purchased a meal at the airport or anywhere else in advance.  While food is the gateway to our stomachs, Visa and MasterCard and its 80% market power are a principle gateway to commerce – they nearly own the market.

Unlike the many choices for selecting a meal, there is one leading choice for electronic payments and nearly all ecommerce.  Businesses, like us, are forced to accept both payment cards. 

Food on planes are a good example, and so too is one new theme of the board game Monopoly.  There is now an electronic banking version. No kidding. Click here to view. 


According to the game, you “wheel and deal your way to a fortune even faster using debit cards instead of cash! All it takes is a card swipe for money to change hands. Now you can collect rent, buy properties and pay fines – with the touch of a button! It’s a new way to play the family classic that’s been brought up-to-date with modernized tokens (including a Segway personal transporter, an Altoids tin, space shuttle, flat-screen TV, baseball cap and a dog in handbag!), higher property values and locations based on your favorite landmarks.” 

Very modern, but the only thing nearly as antiquated in design as was the original board game is the payment twist.  When merchant interchange fees were created, it was cost-based and used to cover the fees associated with a four-party clearing house.  They were created back when there were hand-swipe manual card imprinters.  The new board game version is training people to use debit cards.  And, MasterCard and Visa are coincidently spending millions to train debit card holders to insist that retailers process the cards at the much higher, non-fixed fee credit card rates