Interchange Fight Update: Lawsuits Galore, as More States Consider Surcharging Bans

Retailers and card networks have gone tit-for-tat on lawsuits lately in the ongoing fight over credit card interchange fees.

First, in mid-June, Visa filed a case against Wal-Mart in order to essentially bind them to the terms of the $7.25 billion antitrust settlement between retailers and Visa and MasterCard still being negotiated in federal court in the southern district of New York. In its complaint, Visa aimed to bar the world's largest retailer, one of nearly 8,000 that have already opted out of the previous settlement, from filing future price-fixing claims against Visa for how they set the interchange, or "swipe," fees that merchants pay whenever a customer pays by credit card. Incidentally, a provision that would keep companies that are party to the settlement from engaging in just that sort of behavior is one of the major sticking points driving merchant opposition to the proposal.

In its complaint, Visa said that it filed the suit to prevent "the continuation of endless, wasteful litigation between the parties," and that the company "seeks finality in its dispute with Wal-Mart." Under the terms of the still-pending settlement, retailers that opt out can file their own lawsuits over the interchange fees. Visa has argued that Wal-Mart "has made plain" that it will do so, but Wal-Mart has only publicly said that they're still evaluating whether to file their own suit.

If Wal-Mart did exercise its rights under that provision of the settlement, it certainly wouldn't be the first to do so. More recently, just before the end of June, a group of around 30 retailers, including Amazon and 7-Eleven, filed their own lawsuit against Visa and MasterCard, rejecting the agreement for, again, the fact that its penalties are too low and the fact that it grants Visa and MasterCard far too much freedom to raise interchange rates in the future.

"Once Visa and MasterCard acquired substantial market power over merchants, they maintained it by forcing merchants to pay even higher interchange fees to continue to fund these price-fixing schemes," said the retailers in their complaint. Other similarly-minded groups have already filed their own lawsuits, including CVS Pharmacy, and another group led by Target and Macy's.

While this drama plays out on the national stage, at the state level several legislatures are moving to ban surcharging altogether, meaning merchants will be unable to pass on their credit card processing fees to their customers located in the states where these measures are enacted. So far, the 11 states with surcharge bans are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas and Utah, which enacted a limited year-long ban in April that applies only to transactions of $10,000 or less.

The push for this type of legislation is being driven directly by the debate between retailers and the payment industry over who has to pay card processing costs. In addition to the aforementioned 11 states that already ban surcharging, now nearly 20 additional states are considering new, similar legislation governing payment cards and interchange fees.

- Jacob Barron, CICP, NACM staff writer

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