According to the complaint, American Express, MasterCard and Visa maintain rules that prohibit merchants from encouraging consumers to use lower-cost payment methods when making purchases. For example, the rules prohibit merchants from offering discounts or other incentives to consumers in order to encourage them to pay with credit cards that cost the merchant less to accept.
"These restrictive rules restrain competition among credit-card networks for merchant acceptance and distort the competitive process," said Christine Varney, Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "The proposed settlement with MasterCard and Visa is an important step in bringing more credit-card competition to the point of sale. The department's lawsuit against American Express will continue that effort and, if successful, allow merchants more freedom to benefit their customers."
Click hereto read Attorney General Eric Holder's remarks.
"This is a historic move by the Department of Justice, and a significant step towards a more competitive market," Henry Armour, CEO of the National Association of Convenience Stores (NACS), told the Merchants Payment Coaltion (MPC). "For the first time in history, the Visa and MasterCard stranglehold prohibiting price competition on cards is being broken. With price competition on cards, consumers and small businesses win. After vigorously fighting these reforms on Capitol Hill for years, it is a major breakthrough to have these much needed reforms forced upon the credit card cartels by the Department of Justice.""This is a huge win for Main Street merchants and consumers," said Tom Robinson, president of Rotten Robbie convenience stores, Santa Clara, Calif. "Not only has the U.S. Congress stood up for small business owners and our customers, but now the Department of Justice is joining the fight and telling Visa and MasterCard that they have to play fair if they want to stay in the game."(Click here for previous CSP Daily News coverage of the in interchange or "swipe fee" issue.) Credit card acceptance costs U.S. merchants approximately $35 billion each year, according to DOJ. Those costs are collected from merchants in the form of a swipe fee that they pay every time a credit card is used. American Express has the highest merchant fees of any credit card network. Merchants pass on these billions of dollars in fees to all their consumers in the form of higher retail prices. By preventing merchants from rewarding consumers when they use less-expensive credit cards to make a purchase, American Express, MasterCard and Visa have inhibited merchants' ability to reduce card acceptance costs, and therefore their retail prices to consumers.
The proposed settlement requires MasterCard and Visa to allow their merchants to: Offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment. Express a preference for the use of a particular credit card network, low-cost card within that network or other form of payment. Promote a particular credit card network, low-cost card within that network or other form of payment through posted information or other communications to consumers. Communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network, or other form of payment. The proposed settlement allows any merchant that only accepts Visa and MasterCard to take advantage of the relief immediately.
The ongoing litigation against American Express seeks to allow merchants that accept American Express to engage in the same kind of discounting and encouragement that the proposed settlement with MasterCard and Visa allows. Until American Express's restraints on merchants are lifted, the many merchants that accept American Express, as well as Visa and MasterCard, will not be able to take full advantage of their new options under the proposed settlement, the department said.The Merchants Payments Coalition is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.
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