This thought just popped into my mind when I read an article yesterday on Payments News, titled Consumers' Card Rewards Could Be Cut By Interchange Legislation. Scott Loftesness writes, "While merchants are saying that any interchange fee reductions would be passed along to consumers through lower prices, many in the industry say that is unlikely to be the case - and point to the lack of price reductions following action taken by the Reserve Bank of Australia that cut interchange fees significantly in that country."
If merchants pass along reductions to consumers, then their margins would be the same - so why all the cost and effort of lobbying the government to cut interchange? It doesn't make sense. Of course they will keep the savings.