Swipe Fee Settlement Approved To The Chagrin Of The Retail Industry

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

“The settlement rewards the perpetrators and traps the victims,” NRF lawyer asserts

On Friday, Judge John Gleeson approved the $5.7 billion settlement between merchants and Visa and MasterCard. Judge Gleeson says that this ruling will “empower” retailers to educate customers about swipe fees and ultimately influence customer’s choice of payment methods. Gleeson argues that this was the best option for all those involved because  “the settlement secures both a significant damage award and meaningful injunctive relief for a class of merchants that would face a substantial likelihood of securing no relief at all if this case were to proceed.”

For decades, both Visa and MasterCard have faced legal opposition from merchants on the grounds that Visa and MasterCard have been operating price-fixing schemes on the swipe fees charged to merchants each time customers use credit or debit cards. With the settlement, retailers stand to gain roughly one-third of a year’s worth of interchange payments and, in certain situations, will be able to charge customers an extra fee when they use a credit card to pay.

Visa and MasterCard representatives have both expressed approval of the ruling. In particular, Visa CEO Charlie Scharf says, “Today, we have realized a significant achievement in our efforts to resolve the long standing legal differences between merchants and the payment industry. The settlement, which was negotiated over many years, is fair for all parties involved.”

However, merchants are far from pleased, saying that the settlement will not keep Visa and MasterCard from continuing to raise swipe fees, which, according the NRF, have already tripled over the last decade. NACS president Hank Armour says, “The settlement provides nothing of any real value beyond the money. And the scope of the release will allow the defendants to raise rates and recoup the money before it is even distributed to merchants…” While the settlement does open up the option of surcharging under certain circumstances, objectors see no light in this reform, considering that the opportunities to surcharge are limited, and surcharging is not permitted in certain states. Similarly, surcharging could alienate customers, driving them to other retailers that don’t charge extra for using a card.

Both the NRF and the Retail Leaders Industry Association have said they will be continuing the fight to protect merchants and to keep consumers happy, which suggests that the swipe fee issue is still far from resolved, regardless of this settlement. Indeed, around 8,000 merchants have opted out of the damages portion of the current settlement, including some of the largest retailers in the U.S., including Walmart, Amazon.com, and Target. These retailers were primarily concerned that a litigation release in the settlement could ban merchants from suing card companies over the recently contested rules or over any new rules that might arise in the future — especially in the face of new technologies. For instance, these releases could one day limit up-and-coming mobile payment technology in the retail industry. Michael Canter, a lawyer for the objectors, claims that mobile payment systems could help merchants reduce or escape interchange fees, but that this potential could be “trumped” by card companies protected by the current settlement’s releases.    

An Evolution Instead Of A Revolution:  In-Store Mobile Payment Technology Adoption

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