ALEXANDRIA, Va., July 13, 2012 /PRNewswire-USNewswire/ --The proposed settlement of longstanding antitrust litigation between merchants and the credit card industry was rejected by the National Association of Convenience Stores (NACS), a class plaintiff in the lawsuit.
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.
"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."
The proposed settlement is the largest antitrust settlement in U.S. history, but 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, 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.
As a class plaintiff in the litigation, NACS sought a trial to establish that the anticompetitive practices engaged in by the credit card industry are illegal. NACS also pushed to end the practices engaged in by the credit card companies that don't allow for market 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."
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. That oversight 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 proposed settlement also sets a dangerous path for the future of the payments landscape. Visa and MasterCard will be able to use their power in the market to prevent new entrants, like PayPal, from expanding their share of the market. And the proposed settlement allows Visa and MasterCard to continue to require that merchants accept all of their credit cards no matter how expensive they make those cards.
"NACS does not accept this proposed settlement and we reserve the right to fight it if other class representatives do accept it," said NACS President and CEO Henry Armour.
"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," added Armour.
"NACS has sought for years to bring competition and transparency to the credit card swipe fee market," added Robinson. "This proposed settlement does not come close to providing even a minimal level of the competition and transparency that merchants, their customers and the U.S. economy need."
Founded in 1961 as the National Association of Convenience Stores, NACS (nacsonline.com) is the international association for convenience and fuel retailing. The U.S. convenience store industry, with more than 148,000 stores across the country, posted $681 billion in total sales in 2011, of which $486 billion were motor fuels sales. NACS has 2,200 retail and 1,600 supplier member companies that do business in nearly 50 countries.
SOURCE National Association of Convenience Stores
