Formal Opposition to
Retail Payment System (Ban on Merchant Surcharges) Amendment Bill
(Government Bill 205–1, Scott Simpson)
From: Ukes Baha | 10 October 2025
Submitted in response to the call for the Retail Payment System (Ban on Merchant Surcharges) Amendment Bill
Summary of Position
I ask the Committee to reject the Bill in its current form.
Although framed as a consumer-protection measure, this Bill enacts a blunt prohibition that risks eroding pricing transparency, burdening small businesses, and displacing cost burdens invisibly. It is based on contested assumptions, grants broad delegated powers, and lacks sufficient guardrails against unintended harms. The Bill risks replacing visible cost choice with hidden, system-wide cost imposition — reversing transparency rather than enhancing it.
Core stance
- Flawed assumptions and weak evidence base: The claimed “$150 million paid in surcharges, $45–65 million in excess” rests on opaque methodology and contested data.
- Mandate shift & purpose override: The insertion of s28A reframes the Act’s purpose in narrow terms (“transparency, certainty, convenience”) for the surcharge subpart, possibly supplanting broader public interest aims.
- Excessive regulatory delegation: The regulation-making power (s54(1)(aa)/(2B)) allows bans by method, product, merchant class, or network — opening scope creep and unequal treatment.
- Legal uncertainty / ambiguity: Concepts like “card-present”, “digital or tokenised credential”, and distinctions of “EFTPOS network” are narrowly defined and may not map cleanly to evolving payments technology.
- Insufficient consumer remedy and penalty design: The Bill allows surcharge refund (s28C) and pecuniary penalties (s28D/28E), but lacks provisions for compensation, interest, or procedural fairness safeguards.
- Disproportionate burden on small & emerging merchants: Small traders may struggle to reconfigure pricing or absorb impacted flows, especially while cost savings (via interchange caps) only phase in over time.
- Risk of cost shifting & hidden bundling: Rather than eliminating costs, the Bill forces merchants to embed them across all prices — harming those least able to absorb increases.
- Risk of regulatory creep & fairness erosion: Future regulation could sweep in online payments, particular merchant classes, or networks, without full parliamentary review.
- Weak enforcement / oversight: The Commission has corrective notice powers, but the Bill lacks explicit procedural limits, external audits, or oversight by affected stakeholders.
Recommendation: Reject the Bill. If it proceeds, insert strong safeguards, transparency duties, warning-first provisions, and a statutory review clause.
Constitutional, Economic & Democratic Framework
- Transparency & pricing truth: One core virtue of a free market is visibility of incremental cost. Banning surcharges suppresses that signal and erodes consumer ability to compare cost by payment method.
- Economic efficiency & choice distortion: Removing the surcharge option may encourage overuse of more expensive payment methods, inflating the overall cost of the payment system for all users.
- Rule of law & delegated legislation: Granting expansive regulatory authority over bans by merchant class or payment product without mandatory legislative scrutiny risks arbitrary or uneven treatment.
- Fairness and equity: The burden of cost absorption will fall most heavily on low-margin, small, or rural merchants. Consumers using “cheap” payment methods may be forced to subsidise those using expensive ones.
- Democratic accountability: Primary legislation should explicitly set major restrictions; embedding further expansions in regulations undermines parliamentary deliberation and public visibility.
Clause-by-Clause Concerns & Suggested Fixes
| Clause / Section | Problem | Suggested Amendment / Safeguard |
|---|
| s28A (Purpose override) | Narrows the purpose to surcharge prohibition, side-lining competition, equity, or public interest goals | Retain original s3 purpose as a balancing criterion; require that Minister/Commission decisions explicitly weigh competition, small-business impacts, pass-through, and equity |
| s28B (Prohibition scope) | (a) “card-present” is technology-specific and may exclude modern flows; (b) delegated power lets government expand prohibition broadly | Clarify “card-present” to include contactless, token flows, unattended devices; limit regulatory expansion to specified contexts only, with affirmative parliamentary approval |
| s28C (Consumer redress) | Mere surcharge repayment is weak; lacks interest, damages, and timeliness obligation | Mandate interest/compensation on refunds; require proof standard; set 30-day maximum for refund; allow collective redress through approved consumer bodies; allow class actions |
| s28D / 28E & s40 (Penalties & notices) | Strict liability risk; no safe harbour; notice periods too short | Introduce “good faith” defences or safe harbour for transition errors; require minimum warning period before enforcement; limit penalties for first breach |
| s54(1)(aa), (2B) | Regulation may ban surcharges for certain classes or merchants, risking unfairness | Mandate that any expansion must include a regulatory impact statement (distributional impacts), public consultation (including small businesses), and Parliament’s explicit approval |
| General / transitional | Binds merchants before cost savings fully phase in, exposing squeezed margins | Insert delayed commencement: surcharge ban only begins when audited pass-through of interchange reductions is confirmed; provide transitional assistance to small merchants |
Rights & Equity Implications
- Disproportionate burden on the vulnerable: Small, rural, or low-margin operators are more exposed; the Bill shifts burdens invisibly to all consumers.
- Power imbalance magnification: Large chains or well-resourced players can better absorb embedded cost strategies, tilting competition.
- Loss of consumer agency: Consumers lose the ability to choose a cheaper payment method and see a direct trade-off.
- Potential for discriminatory regulation: Power in s54(2B)(d) to treat merchant classes opens scope for politically influenced carve-outs or discriminatory treatment without oversight.
- Chilling of innovation: The ban may disincentivise new payment models or cost-reflective charging innovations.
Evidence & Accountability
- Questionable “excess surcharge” estimates: Demand full disclosure of the methodology behind the “$45–65 million excess” estimate from MBIE and Treasury; test sensitivity across merchant types and payment mix.
- Lack of data on pass-through dynamics: The Bill presumes interchange fee cuts are passed to merchants then consumers—but intermediaries may retain margins. Require empirical modelling and monitoring.
- Transparency in enforcement: Require the Commission to publish an annual report showing enforcement actions, notices, refunds paid, and appeals by merchant size/sector.
- Anonymised impact data: Require annual publication of anonymised merchant-level data to assess distributional fairness and competitive neutrality.
- Sunset / review clause: Mandate a five-year automatic review of the ban’s effects (prices, business viability, competition) before renewal.
- Stakeholder consultations: Any decision to expand the prohibition must go through full public consultation including small business voices.
Recommendations
Reject the Bill.
If the Committee recommends proceeding, I recommend:
- Adopt all safeguards above: warning-first regime, narrow definitions, safe harbour, robust consumer redress, oversight, delayed commencement, and review clause.
- Require that any regulatory expansion be subject to affirmative resolution by Parliament, with full explanatory material.
- Demand a policy memorandum and sector impact analysis for each expansion, and regular reporting on outcomes and distributional impacts.
- Retain the ability of industry bodies or consumer groups to seek judicial review or private enforcement of rights under this subpart.
References
- Bill text: Retail Payment System (Ban on Merchant Surcharges) Amendment Bill, Government Bill 205–1. parliament.nz+1
- MBIE / Treasury Regulatory Impact Statement (2025). mbie.govt.nz+1
- Hansard, First Reading (16–17 September 2025): Scott Simpson, Dr Duncan Webb, Chlöe Swarbrick, Nicola Willis. hansard.parliament.nz+1
- Productivity Commission submissions on payment system competition (2022–23). productivity.govt.nz+1
- Competition economics literature on interchange/pass-through and surcharge bans. academia.edu+1
- Administrative law on delegation, rule of law, fairness. nzlii.org+1
- Comparative jurisdictions: UK, EU, Australia — experience with surcharge bans and payment regulation. legislation.gov.uk+1
Respectfully submitted,
Ukes Baha
Public Health Advocate | Counsellor | Policy Analyst
ukesbaha.com