July 17, 2012
The settlement of a group of long-running lawsuits against Visa, MasterCard and several large banks has given retailers the right to charge fees to customers who use credit cards to make purchases. In addition, the retailer plaintiffs—ranging from giant chains to small mom-and-pop stores—will be paid more than $6 billion in cash by the networks and banks, whom they accused of colluding over interchange fees. The networks also agreed to divert a portion of their interchange fees for the next eight months into an escrow account to pay merchant claims, legal fees and administrative expenses related to the suit—a move that is expected to net some $1.2 billion in savings for merchants. The case was related to credit cards only.
Under the agreement, retailers will be allowed to impose a surcharge on customers who use credit cards—something they have long clamored for, claiming such fees were necessary to offset credit card interchange fees. The rule changes on surcharging likely would be implemented in early 2013. “MasterCard and Visa will modify their rules to permit merchants to impose a surcharge on credit card transactions,” Terry Maher, an attorney with law firm Baird Holm LLP, tells Paybefore, “and [the networks] will negotiate fees with buying groups that may be formed by merchants.” While it remains unclear if retailers will actually impose surcharges for credit card use, which would likely anger customers, the ability to do so could give them a powerful bargaining chip in negotiating lower interchange fees with card networks, experts say.
Some retail industry groups, however, argue that the settlement was insufficient to change what they describe as an unfair advantage the networks enjoy over merchants. “The money is significant, but money is only temporary—it’s here today and spent tomorrow,” said National Retail Federation Senior Vice President and General Counsel Mallory Duncan. “What we need are changes in the rules that bring about transparency and competition that would be here for years to come.”
On Monday, the National Association of Convenience Stores, a trade group representing some 3,700 convenience stores and other merchants, announced it has hired law firm Constantine Cannon LLP to challenge the settlement, which the group says doesn’t address the core issue of how much control Visa, MasterCard and card-issuing banks have over merchants. “This is a deeply flawed deal that will perpetuate the current system, while giving Visa and MasterCard broad legal cover going forward,” said Jeffrey Shinder, managing partner for Constantine Cannon.