What the Intercharge Fee Settlement Means for Merchants
Many of you may be familiar with the Visa/MasterCard class-action case that just wrapped up in New York. For those who aren’t, here’s what happened: Visa and MasterCard were sued by several retailers and industry players in regard to interchange fees and discount rates. Merchants claimed the card brands were violating anti-trust laws and cooperating to rip off merchants.
The full text of the settlement is 99 pages of legalese, PLUS several appendices, so we’re guessing you won’t want to read it all. Instead, we’ll give you the highlights.
1. The defendants (Visa, MasterCard, JPMorgan Chase, Bank of America, etc.) will pay more than $6 billion in damages to the plaintiff retailers.
2. Visa and MasterCard will temporarily (for eight months) decrease their fees to all merchants by 10 basis points.
3. Visa and MasterCard’s longstanding policies against merchants charging a credit-card surcharge will be reversed, meaning merchants outside of the 10 states that specifically forbid it will now have the option to pass on their swipe fees and “average network fees” directly to customers. (Those who choose to do so, however, will have to post notices at their entrance, their point of sale, and on their receipts.)
The first merchants to join the fight have been involved since June of 2005. So, what have they learned in the last seven years? Well, the fact that they settled for a temporary fix and a relative slap on the wrist for the card brands rather than a long-term resolution that actually fixed the problem means they probably learned that they can’t “win” without a change in the market or a change in the law.
There is some hope for merchants that this change in the markets is coming thanks to point #3 above. If merchants pass along the fees they are being charged by their processor (a risky PR move, certainly) it will become clear to consumers just how much the big banks and card brands are making on their purchases. Angry consumers are a much bigger group than angry merchants – so, maybe they’ll have more success.
Not everyone is so optimistic, though. The National Association of Convenience Stores released a statement saying “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.”
Ultimately, it looks like nothing has really changed. The card brands and banks continue to not have your best interests at heart. Only now, it may be more evident to your customers just how much you have been paying for them to have the convenience of using a credit card.
Our hope is that the new publicity forces the banks and processors to start competing. When they do, Shift4’s flexibility (and your ability as a Shift4 merchant customer to change banks and processors at will) might prove worth its weight in gold.