Nine Retail Trade Groups Take Their Credit Card Settlement Beefs to Congress

Numerous merchants and merchant groups have publicly declared their opposition to a controversial proposed settlement to the big credit card interchange litigation pending in federal court. In hopes of turning the settlement into a political issue, nine trade associations on Thursday took their beefs about it to Congress.

In a letter addressed to the majority and minority leaders of the Senate and the Speaker and minority leader of the House of Representatives and copied to other legislators, the groups reiterated most of the chief complaints already aired against the settlement since lawyers for the merchant plaintiffs and payment card network and bank defendants announced it July 13. The settlement “entrenches the Visa/MasterCard duopoly, enables continued centralized price-fixing by Visa and MasterCard,” and, among other things, “Makes all current and future merchants–even those that are not yet in existence–forever surrender their legal rights,” the letter says.

Besides the National Retail Federation, the biggest general merchant trade group, the letter’s signers include the National Association of College Stores, the National Association of Convenience Stores (NACS), the National Association of Truck Stop Operators, the National Community Pharmacists Association, the National Cooperative Grocers Association, the National Grocers Association, the Retail Industry Leaders Association, and the Society of Independent Gasoline Marketers of America.

The letter alludes to the Durbin Amendment in 2010’s Dodd-Frank Act that for the first time regulated debit card interchange and created merchant-friendly debit transaction-routing rules, but stops short of calling outright for legislation that would similarly regulate credit cards. Such regulation, however, seems to be the groups’ clear intent. “While recent reforms passed by Congress have resulted in some positive changes in the marketplace, the fact is competition and transparency remain absent from the credit card payment market,” it says. In concluding, the groups say they “look forward to keeping you fully informed as the legal process moves forward and the chorus of objections grows.”

The settlement pending before Judge John Gleeson of U.S. District Court in Brooklyn, N.Y., calls for Visa Inc., MasterCard Inc., and some large banks to pay $6.6 billion in damages to merchants and provide another $1.2 billion in temporary credit card interchange reductions. The networks also would relax certain rules, chiefly their restrictions on credit card surcharges. In return, the settlement would free the networks from future challenges by merchants to interchange and their rules.

Jason Oxman, the new chief executive of the Electronic Transactions Association, the national merchant-acquirer trade group, says his members work hand-in-hand with the members of the retailer groups to provide card-acceptance services. But on this issue, he says, acquirers diverge from what the merchant groups seem to want, which he says is government intervention into the process of setting credit card interchange.

“Durbin provided the merchants with a Congressionally-mandated reduction for debit but not for credit,” Oxman tells Digital Transactions News. “One can assume it is a legislative priority to extend the Durbin Amendment relief from debit to credit.” He adds: “When our [merchant] customers are in court and the halls of Congress seeking to replace what is a contractual relationship with a Congressional mandate, that gives us pause.”

Oxman calls the proposal before Judge Gleeson “the largest antitrust settlement in the history of the United States,” and one that he believes most individual merchants, in contrast to their trade groups, support.

Meanwhile, the Electronic Payments Coalition, a group of card networks and banks supportive of the interchange status quo, issued a statement saying, “This politically driven handwringing proves once again that these lobbyists simply want to continue the fight over ‘swipe fees’–continue to look for political handouts–while everyone else is ready to move on.”

The court is accepting formal comments about the July proposal as part of a lengthy review and approval process.