Macdonald-Laurier Institute author Ian Lee spoke with several media outlets this week about a negotiated reduction in the credit card fees companies collect from merchants.
Federal Finance Minister Joe Oliver demanded the two sides voluntarily reach an agreement to reduce the fees or risk being subject to regulation the federal government would impose.
He hoped the merchants would pass on the lower overhead to consumers in the form of lower prices.
However Lee does not believe that’s how it will work out in practice.
He told Global News that there will be unintended consequences to the government’s intervention that will ultimately be of little benefit to consumers.
“There’s no free lunch in the world, so what the bank will do is recover these fees in another manner, like on chequing accounts or some other area,” Lee told Global.
It’s also not very likely to result in merchants lowering prices for consumers, Lee said. Merchants in other countries where governments have mandated a decrease in fees have mostly failed to pass on those savings in the form of lower prices.
Meanwhile, in the Toronto Star, Lee said it would be a mistake to regulate the fees because credit cards are not an essential service.
The federal government announced the deal on Tuesday.
Lee is the co-author of an MLI report that details the consequences of overregulating credit card fees.