"The money is significant but money is only temporary – it’s here today and spent tomorrow,” NRF Senior Vice President and General Counsel Mallory Duncan said. “What we need are changes in the rules that bring about transparency and competition that would be here for years to come.”
The agreement announced late on Friday would require Visa, MasterCard and some of the major banks that issue their cards to pay $6 billion to retailers to settle claims that they engaged in price-fixing in the past. Fees would also be lowered for eight months, a move estimated to be worth $1.2 billion.
The settlement does virtually nothing, however, to address future fees. Retailers had hoped to increase competition by blocking Visa and MasterCard from setting a fixed schedule of fees charged by all banks that issue their cards, or to boost transparency by allowing swipe fees to be shown. Neither was done.
The settlement would give merchants the right to impose a surcharge when customers use a higher-fee credit card – a move that theoretically could be a bargaining chip for retailers trying to negotiate lower fees from the card companies. But the mechanism is unlikely to be helpful because it would require a retailer to impose a surcharge on nearly all credit cards, not just the more expensive premium cards retailers seek to discourage.
In addition, the settlement would bar retailers from future lawsuits over swipe fees on either credit or debit cards.
“Fees are going to keep going up because the tools are ineffective,” Duncan said.
Some retail companies have told NRF they are opposed to the proposed settlement and one retail trade association that is a plaintiff in the case – the National Association of Convenience Stores – has already rejected the offer.
“Not only does the proposed settlement fail to introduce competition and transparency into a clearly broken market, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces,” said NACS Chairman Tom Robinson, president of Santa Clara, Calif.-based Robinson Oil Corp. “This proposed settlement allows the card companies to continue to dictate the prices banks charge and the rules that constrain the market.”
The settlement is subject to approval by a federal judge, who will have to consider objections from merchants and who has yet to rule on the class action status of the suit. NRF has worked extensively on congressional efforts to address swipe fees, but is not a party to the suit. The action was initiated in 2005 by grocers and drug stores and grew to more than 50 lawsuits consolidated in federal court in New York.
(© 2012 National Retail Federation)
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