Not all merchant groups are wild about the proposed settlement in the class action case against Visa, Mastercard and a group of large U.S. financial institutions.
The National Association of Convenience Stores (NACS), one of several plaintiffs that originally filed the suit in the Eastern District of New York, unanimously rejected the proposal, citing a litany of inadequacies that the agreement fails to address. Chief among them is the fact that the settlement doesn't include any means to alter the process by which interchange fees are established.
"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, California-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."
NACS argued that without any mechanism that would force Visa and Mastercard to constrain their interchange rates according to market conditions, the agreement would allow the two credit card giants to continue raising rates as they saw fit, the net result of which will be to make merchants pay for their own settlement.
"Even the monetary agreement in this proposal is a mirage," said Robinson, referring to the more than $6 billion that the defendants will have to pay to retailers as part of the settlement. Despite the fact that the payment will be the largest antitrust settlement in U.S. history, NACS noted that this amounts to less than two months' worth of interchange fees based on the estimated $50 billion in swipe fees collected by the credit card companies on an annual basis. "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," Robinson added.
It's unclear what NACS' opposition means for the still-pending court approval of the settlement, which has so far been agreed to by all defendants, as well as by the court-appointed class counsel for the class action plaintiffs. "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 Chief Executive Officer 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."
Stay tuned to NACM's blog and eNews for more updates and analysis on the settlement.
- Jacob Barron, CICP, NACM staff writer