WASHINGTON – At least one influential group of merchants, the National Association of Convenience Stores, which has been battling Visa and MasterCard over card fees for years, has weighed in against last week’s antitrust settlement on credit card fees and is threatening to block the historic deal.
Meantime, shares in Visa and MasterCard surged yesterday amid news of the settlement, as the market appeared to favor the certainty the deal gave to the finances of the two card companies. MasterCard closed up $7.29 at $436.89 and Visa closed up $3 to $127.15. The two card companies have agreed to pay merchants $6 billion and about a dozen large banks will pay $1.2 billion to settle the antitrust case.
The obstruction by the convenience store owners, who led the fight over the Durbin Amendment’s cuts to debit fees, could be fatal to the deal. The group, which represents 148,000 convenience store owners, said the deal does not go far enough and it will work during the eight-month comment period to amend the terms of the settlement.
“NACS does not accept this proposed settlement and we reserve the right to fight it if other class representatives do accept it,” said Henry Armour, president of the group.
“There is plenty of time for merchants to make thoughtful decisions related to this proposed settlement. 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,” said Armour.
“Because the proposed settlement does not introduce competition and transparency into the broken credit card swipe fee market, the NACS Board of Directors, comprised of more than two dozen merchants, unanimously rejected the proposed settlement agreement,” the group said in a statement.
“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. “This 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 ultimately will pay more as a result of this agreement – without any relief in sight.”
According to the convenience store group, the $7.2-billion settlement 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,” said Robinson, “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.”
“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.”
The proposed settlement does allow merchants to show consumers some of the costs of accepting credit cards, but only under very limited circumstances with strict oversight by Visa and MasterCard, he said. That oversight, said Robinson, “makes the settlement unworkable for virtually all merchants.”
“Visa and MasterCard will continue to separately price-fix fees for thousands of their bank members. This means that banks won’t have to set their own prices and compete like other businesses throughout the U.S. economy. And Visa and MasterCard can continue to police how merchants price their products and stop them from showing consumers the cost consequences of using different credit cards – unless merchants drop American Express,” he said.
The convenience store owners also said they believe the proposed settlement sets a path for the future of the payments landscape whereby Visa and MasterCard can prevent new entrants, such as PayPal, from expanding their share of the market.