Tag Archives: settlement

NRF Opposes Interchange Settlement

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It’s been a little while since the Official Merchant Services Blog touched on the increasingly sensitive topic of the Credit Card Interchange Settlement. We first talked about the possibility of ‘The Big Cash Comeback’ when the settlement was first announced, and later we discussed the opposition to the settlement.

Seven years after the first lawsuits were actually filed against the bank card networks and some leading banks, a tentative settlement was reached on July 13 of this year.  The agreement has had many mixed reviews, and some big name retailers have come out against it, including most recently the National Retailers Foundation, the nations largest retail trade association.  The NRF’s members operate 3.6 million stores nationwide, however the organization itself is not involved in the lawsuit, which includes individual and class merchants as well as trade-group plaintiffs.

Under the proposal, the main defendants, Visa and MasterCard will pay $6.6 billion in damages and temporarily reduce interchange rates to save merchants another $1.2 billion. Merchants also will get greater freedom to surcharge card transactions and could form bargaining groups to negotiate interchange with the networks. In return, the networks will be freed from future legal challenges from merchants regarding interchange rates and merchant rules, even from merchants that didn’t participate in the current lawsuit.

I think the key points here are the temporary reduction of interchange rates as well as the fact that all merchants give up their rights to sue Visa and MasterCard upon accepting the settlement.  Merchants will most certainly be satisfied by the reduction of interchange rates, but the drop will only be temporary.  After a few months Visa and MasterCard will raise them again, and continue to collect outlandish fees for credit card transactions.  Also, not every merchant is involved in this suit. I don’t think it’s a good deal for merchants to give up any of their rights, particularly the rights to any future litigation.

The National Association of Truck Stop Operators (NATSO) released a statement on Monday, announcing their dismissal of the settlement, “We joined this lawsuit in search of real reform to a broken system, one that is shielded from normal competitive forces. This proposed settlement does not achieve this goal. It lacks meaningful fixes to a system that allowed Visa and MasterCard to set artificially high swipe fees and provided retailers and consumers with no choice except to pay.”

This statement echo’s the cries of dissenters, who say the settlement protects the status quo more than anything, and will not change the way the networks set interchange.

In conclusion, the settlement still faces harsh criticism, and Visa and MasterCard have not had much to say to those who oppose it.  Only time will tell if the plaintiffs decide to accept the deal, or push back for a settlement more in their favor.  Host Merchant Services will keep you informed of all the latest news involving this legal battle between the merchants and the card-issuing giants.

Don’t Call it a Comeback

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Today The Official Merchant Services Blog is here to update our readers on the latest development in the  lawsuit against Visa Inc., MasterCard Inc. —  the largest antitrust settlement in U.S. history. We broke the story last week when we revealed that the card companies agreed to pay more than $6 billion to settle lawsuits from retailers claiming that the card issuers engaged in anti-competitive practices.

The July 13 settlement still needs to be OK’d by a judge, and today we learned that the decision may be getting held up by plaintiffs who do not want the settlement and the money it brings.

The Opposition and Their Position

The National Association of Convenience Stores (NACS), a class plaintiff in the lawsuit, rejected the settlement offer according to their own website. Because the proposed settlement does not introduce competition and transparency into the broken credit card swipe fee market, the NACS Board of Directors unanimously rejected the proposed settlement agreement.

The settlement is the largest antitrust settlement in U.S. history, but NACS was not impressed because it only amounts to less than two months’ worth of swipe fees, based on the estimated $50 billion in swipe fees collected by the credit card companies on an annual basis. Worse, NACS feels that with the settlement there are no fundamental market changes that would constrain Visa and MasterCard from continuing to raise rates.

Wal-Mart Joins Opposition

The NACS opposition was announced almost immediately after the news of the settlement proposal was revealed. It’s taken a little bit of time, but others have started to join the opposition. Wal-Mart Stores Inc, the world’s largest retailer, joined the growing chorus of merchants opposed to the proposed settlement. Wal-Mart said the $7.25 billion settlement would not change a “broken” system of what credit card companies charge retailers for processing credit and debit card payments, known as “swipe fees.”

For the Record

NACS and Wal-Mart share the same criticism of the settlement.

“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, who is also president of Santa Clara, Calif.-based Robinson Oil Corp.

Mirroring the NACS criticism, Wal-Mart said in a statement released by the company, “the proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year.”

Robinson also said, “this proposed settlement allows the card companies to continue to dictate the prices banks charge and the rules that constrain the market including for emerging payment methods, particularly mobile payments. Consumers and merchants ultimately will pay more as a result of this agreement — without any relief in sight.”

Wal-Mart again mirrored the NACS statements and went further when it said the settlement would not “prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year,” and would “also constrain emerging payments innovation.” These innovations the opposition keeps referring to most likely include mobile wallets that allow consumers to pay using their smartphones.

Stay on Target

Joining Wal-Mart and NACS as vocal opponents of the settlement was Wal-Mart competitor Target. In a July 20 statement, Target used the now familiar language that the united opposition is using when it said in a statement that: “The proposed settlement would perpetuate a broken system, restrict retailers from any future legal action and offer no long-term relief for retailers or consumers.”

The NACS, Wal-Mart and Target were also joined by SIGMA, an association representing independent motor fuel marketers and chain retailers, in opposing this settlement. And then the National Grocers Association jumped on the anti-settlement bandwagon on July 27. “NGA joined the lawsuit on behalf of its independent retail grocer members over seven years ago to bring about real reform of the anticompetitive credit card swipe fee system,” said NGA president and CEO Peter Larkin in a statement. “This proposed settlement agreement fails in this regard by allowing Visa and MasterCard to continue their dominant anticompetitive practices.”

The Final Word

So as opposition mounts, it may be all for naught. The final decision still rests with a judge. It will be up to U.S. District Court Judge John Gleeson to approve or reject the settlement, a process that will play out in Brooklyn federal court over the next few months.