The companies this week announced an agreement<\/a> to cap credit-card swipe fees and allow merchants to steer consumers to cheaper payment options in order to end multidistrict litigation dating back to 2005. Merchants are expected to save $30 billion in swipe fees, also known as interchange fees, over five years.<\/p>\n But others aren\u2019t convinced the settlement does enough. Target Corp., Starbucks Corp., Foot Locker Inc. and Crate & Barrel are among the retailers that opted out of a previous $5.6 billion class action settlement with the card companies to pursue their own case. They expect to go to trial with claims accusing Visa and Mastercard of colluding on the fees after a federal judge denied<\/a> the card companies\u2019 bid to end the litigation. However, opting out of the March 26 proposal\u2014which is focused on injunctive, rather than monetary relief\u2014isn\u2019t an option.<\/p>\n Some retailers slammed the details in the agreement, which only caps swipe fees for five years, during which time Visa and Mastercard can\u2019t go above rates that existed at the end of 2023.<\/p>\n \u201cWe\u2019re pushing forward with a trial,\u201d said Chris Jones, chief government relations officer and counsel for the National Grocers Association, which is pursuing a trial along with Target and other retailers. \u201cOur fear is that this settlement would be crammed down and imposed on everyone, including opt-out groups. We want more harsh relief and from what we have read, this doesn\u2019t meet the mark.\u201d<\/p>\n See also: Visa-Mastercard Deal Rattles Consumers\u2019 Credit Card Rewards Math<\/a><\/p>\n The proposed settlement is weak for merchants, given that it\u2019s expected to save them $30 billion over five years, while US businesses paid more than $170 billion in swipe fees last year alone, said Doug Kantor, member of the executive committee of the Merchants Payments Coalition. The coalition is a Washington, D.C.,-based group of retailers advocating for competition in the payments market.<\/p>\n Visa and Mastercard will continue to set prices for swipe fees charged to merchants each time a customer makes a purchase, and there\u2019s nothing standing in the way of the companies raising them again after five years, Kantor said.<\/p>\n \u201cIt\u2019s very small and very temporary relief and then back to business as usual,\u201d Kantor said. \u201cThe plaintiffs want a market that actually works and puts normal competitive pressure on fees.\u201d<\/p>\n Kantor\u2019s sentiments were echoed by several merchants, including Tom Charley, a co-owner of three Shop \u2018n Save stores in western Pennsylvania. <\/p>\n \u201cWhat happens after five years? They have 100 percent control of the market, and they can do whatever they want,\u201d Charley said about Visa and Mastercard. \u201cTheir rates have gone up significantly over the last five years, and that\u2019s going to continue. And with inflation, it\u2019s even worse.\u201d<\/p>\n Steve Shadowen of Hilliard Shadowen LLP, one of the lead attorneys for the class of merchant plaintiffs covered by the proposed settlement, disagreed. He said five years was plenty for market forces to take over. <\/p>\n If the settlement is approved, it would cover all US merchants who accepted Visa or Mastercard debit or credit cards in the US at any time during the period between Dec. 18, 2020, and when the court enters the final judgment. Retailers pursuing a trial for monetary damages against the card companies would also be covered by the settlement, and wouldn\u2019t be able to opt out of the deal.<\/p>\n \u201cWe will have a much more competitive marketplace at the end of five years, and it will not be possible for these networks and banks to go backwards,\u201d Shadowen said. \u201cAnd if they were to try to, then they can be sued again.\u201d<\/p>\n The proposed settlement for injunctive relief comes a year after a federal appeals court upheld a landmark antitrust deal<\/a> in which Visa and Mastercard agreed to pay $5.6 billion to millions of merchants but didn\u2019t address concerns about business practices.<\/p>\n This week\u2019s proposed settlement doesn\u2019t change any of the problems with Visa and Mastercard\u2019s business practices, including the so-called \u201chonor all cards\u201d rules, said Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. Those rules mean that if a merchant accepts one of the brands\u2019 cards, it must accept all of the brands\u2019 cards. The NRF represents retailers including Walmart, Target, Macy\u2019s and Levi Strauss & Co. as well as small businesses. <\/p>\n Ideally, merchants would have more autonomy with respect to which cards they choose to honor, something the card companies would never agree to, Martz said.<\/p>\n \u201cIt\u2019s too lucrative,\u201d she said. \u201cIf they have to compete, they are going to start losing.\u201d<\/p>\n Merchants also fretted about how much incentive they would have to steer customers to preferred cards with less costly fees\u2014especially if bigger retailers continued to accept all cards, including those charging higher interchange fees like Chase Sapphire Reserve or Visa Infinite. The proposed settlement puts the onus on merchants to encourage customers to use other payment methods.<\/p>\n \u201cIf Walmart isn\u2019t going to do it, do you think I\u2019m going to do it?\u201d said Charley, who said his stores\u2019 main competitors are Walmart and Target. \u201cI\u2019m competing with big, big guys out there.\u201d<\/p>\n Jones, of the National Grocers Association, agreed that grocers want to accommodate customers regardless of what card they have.<\/p>\n \u201cGrocery is a volume business so our goal is largely to get customers in and out of the grocery store as quickly as possible,\u201d he said.<\/p>\n\u2018Very Small and Very Temporary\u2019<\/h2>\n
Proposed Settlement<\/h2>\n
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