Credit card giants settle US retailer lawsuit
Source: Agencies |
July 15, 2012, Sunday
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Print Edition
Print Edition
VISA, MasterCard and major banks agreed to pay retailers at least US$6 billion to settle a long-running lawsuit that alleged the card issuers conspired to fix the fees that stores pay to accept credit cards. As part of the settlement, stores from Rite Aid to Kroger will be allowed to charge customers more if they pay using a credit card.
The pact, announced late on Friday, was called by lawyers involved in the case the largest antitrust settlement in United States history. It was seen as a major victory for merchants that have long complained about the billions of dollars in so-called "swipe" or "interchange" fees that they pay to banks. But at a time when shoppers increasingly are using credit and debit cards, merchants will face a dilemma: Whether to charge shoppers extra for using plastic, and if so, how to do it without angering them.
Marilyn Landis, of the National Small Business Association, said that the settlement is a victory for small businesses because it could ultimately lead to banks lowering the fees they charge stores.
Landis, who owns Pittsburgh-based financial services firm Basic Business Concepts, said that would be a big relief. She's now paying 3.75 percent each time a customer pays with a credit card. If bank card companies cut the fees they charge her to 2.75 percent, she would save a dollar on every US$100 in sales. "That's huge," she said.
According to the National Retail Federation, the largest US retail group, swipe fees costs for stores total about US$30 billion per year. Mallory Duncan, senior vice president and general counsel for the group, said the settlement is a step in the right direction. "What we need are changes in the rules that bring about transparency and competition."
The dispute between stores and banks dates back to 2005. That's when large retailers, including Kroger Co and Walgreen Co began filing price-fixing lawsuits against Visa, MasterCard and other banks. The retailers claimed the credit card issuers worked together to fix the fees that stores pay to accept credit and debit cards. The fees, which vary depending on the type of store and the type of card issued, average about 2 percent of the price of a purchase.
Visa and MasterCard make money on the fees that stores pay for each customer that uses cards for their purchases. The fees are set by card processing networks but collected by, and split with, the banks that issue the cards.
The card companies long have defended the fees they charge stores. They say stores benefit from being able to accept credit and debit cards from customers, who often spend more when they're using plastic instead of cash or checks.
The pact, announced late on Friday, was called by lawyers involved in the case the largest antitrust settlement in United States history. It was seen as a major victory for merchants that have long complained about the billions of dollars in so-called "swipe" or "interchange" fees that they pay to banks. But at a time when shoppers increasingly are using credit and debit cards, merchants will face a dilemma: Whether to charge shoppers extra for using plastic, and if so, how to do it without angering them.
Marilyn Landis, of the National Small Business Association, said that the settlement is a victory for small businesses because it could ultimately lead to banks lowering the fees they charge stores.
Landis, who owns Pittsburgh-based financial services firm Basic Business Concepts, said that would be a big relief. She's now paying 3.75 percent each time a customer pays with a credit card. If bank card companies cut the fees they charge her to 2.75 percent, she would save a dollar on every US$100 in sales. "That's huge," she said.
According to the National Retail Federation, the largest US retail group, swipe fees costs for stores total about US$30 billion per year. Mallory Duncan, senior vice president and general counsel for the group, said the settlement is a step in the right direction. "What we need are changes in the rules that bring about transparency and competition."
The dispute between stores and banks dates back to 2005. That's when large retailers, including Kroger Co and Walgreen Co began filing price-fixing lawsuits against Visa, MasterCard and other banks. The retailers claimed the credit card issuers worked together to fix the fees that stores pay to accept credit and debit cards. The fees, which vary depending on the type of store and the type of card issued, average about 2 percent of the price of a purchase.
Visa and MasterCard make money on the fees that stores pay for each customer that uses cards for their purchases. The fees are set by card processing networks but collected by, and split with, the banks that issue the cards.
The card companies long have defended the fees they charge stores. They say stores benefit from being able to accept credit and debit cards from customers, who often spend more when they're using plastic instead of cash or checks.
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