The headlines from Friday's "swipe fee" settlement between credit card companies and retailers casts it as a victory for retailers. At least one group of retailers doesn't see it that way.
The National Association of Convenience Stores (NACS), a class plaintiff in the lawsuit yielding a more than $6 billion settlement, says it rejects the agreement.
The settlement, which must still be approved by a federal judge, allows retailers to charge customers more if they pay with a credit card. MasterCard, Visa and major banks, including JPMorgan Chase, Bank of America and Wells Fargo, agreed to the huge payment to settle accusations they engaged in anti-competitive practices in payment processing. The dispute has dragged on for seven years.
"Our decision to settle is based on our belief that MasterCard and our stakeholders are best served by an amicable resolution," said Noah Hanft, MasterCard's general counsel.
Unmoved
But the NACS Board of Directors unanimously rejected the agreement, unmoved by the more than $6 billion.
"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, president of Santa Clara, Calif.-based Robinson Oil Corp.
According to the convenience store group, the 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 to pay more?
"Consumers and merchants ultimately will pay more as a result of this agreement -- without any relief in sight," Robinson said.
The proposed settlement allows merchants to show consumers some of the costs of accepting credit cards, something they have been fighting for. But NACS says the agreement allows that disclosure only under very limited circumstances with strict oversight by Visa and MasterCard.
While news reports have noted the proposed settlement is the largest antitrust settlement in U.S. history, NACS says 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, the group says, there are no fundamental market changes that would constrain Visa and MasterCard from continuing to raise rates to a point where the net effect is to make merchants pay for their own settlement - and then some.
Larger goals
As a class plaintiff in the litigation, NACS pushed for a trial where it intended to argue that the anticompetitive practices engaged in by the credit card industry are illegal. NACS said it wants to force changes on credit card companies that it says would open the market to more competition.
"Even the monetary agreement in this proposal is a mirage," said Robinson. "Merchants won't get these funds for years and will have paid more than that through increased swipe fees long before they see those funds."
NACS made clear that it will do what it can to prevent the settlement from going forward but said it hopes other retailer groups will also reject it.
"There is plenty of time for merchants to make thoughtful decisions related to this proposed settlement," said NACS President and CEO Henry Armour. We hope and expect that, as they have the time to review it, many other merchants including class representatives will decide to reject this proposal."
How they voted
Yes
Yes