ALEXANDRIA, Va. -- An amended consolidated complaint against Visa, MasterCard and several major banks was filed by a broad range of merchant groups, including the National Association of Convenience Stores (NACS), in the Eastern District of New York earlier this week, the association said.
This consolidated complaint, filed April 24, updates an earlier complaint filed in September 2005 by NACS and other groups that alleged that Visa, MasterCard and the banks engage in collusive practices to fix credit card interchange fees. The complaint updates the [image-nocss] earlier complaint to include debit cards, and additional merchant associations joined as plaintiffs.
We believe that price fixing of interchange is equally as problematic in debit cards as it is in credit cards, said NACS President and CEO Henry O. Armour. Because debit cards are commonly used at convenience stores, especially at the gas pump, this is a significant amendment to the complaint.
He added, Whether debit or credit cards, the fact is that Visa and MasterCard charge Americans some of the highest interchange fees in the world.
Armour testified on February 15 before the U.S. House of Representatives Subcommittee on Commerce, Trade & Consumer Protection in the hearing The Law and Economics of Interchange Fees.
The complaint in the lawsuit seeks a permanent injunction barring the companies from continuing practices that violate antitrust law.
Interchange, a fee that is collectively set by Visa and MasterCard's member banks, is a percentage of each transaction that banks collect from retailers every time a credit or debit card is used to pay for a purchase, adding up to billions of dollars each year. The complaint alleges that Visa and MasterCard are able to set these fees without apparent respect to the typical market forces.
The system is clearly broken, said Mallory Duncan, chairman of the Merchants Payments Coalition (MPC), a group of some 20 trade associations representing retailers, restaurant, supermarkets, drug stores, c-stores, gas stations, online merchants and other businesses that accept debit and credit cards that is fighting for a more competitive card system. Visa and MasterCard compete to charge the highest interchange feesfees that banks don't pay but all consumers do. In virtually every other marketplace, competition results in lower prices, but not with interchange fees, said Duncan, who also is senior vice president and general counsel at the National Retail Federation (NRF).
In addition to a fairer fee structure, the MPC, of which NACS is a founding member, is calling for more transparency as it relates to the hidden nature of the rules that govern interchange.
It's not just that the fees are unfair, they are hidden, Duncan said. Credit card companies can increase their interchange feeswhich can approach 2% or more on each transactionby any amount, and they forbid merchants from disclosing the fees they charge.
In the United States, interchange impacts not only the merchants, but has the largest impact on American consumers. This hidden tax was estimated to cost approximately $26 billion in 2004, said NACS.
Several members of the MPC are litigants in the lawsuit, including NACS, the National Grocers Association (NGA), the National Restaurant Association (NRA) and the National Association of Travel Plazas and Truckstops (NATSO).
The case is expected to go to trial in 2008 (see related feature in this issue of CSP Daily News).
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.