NRF Urges Passage of Antitrust Legislation Addressing $48 Billion in Hidden Credit Card Fees

For Immediate Release
Contact: J. Craig Shearman (202) 626-8134
shearmanc@nrf.com 

NRF Urges Passage of Antitrust Legislation Addressing $48 Billion in Hidden Credit Card Fees

WASHINGTON, May 8, 2008 – The National Retail Federation today urged members of the House Judiciary Committee to support major antitrust legislation set for a hearing next week that would require Visa and MasterCard to negotiate with merchants over credit card processing fees that will cost merchants and their customers a projected $48 billion this year.

“This bipartisan piece of legislation is a sensible, market-oriented solution to the escalating problem of credit card interchange, a hidden fee that is assessed against a merchant every time a credit or debit card is used,” NRF Senior Vice President for Government Relations Steve Pfister said. “In a functional, competitive market, one would expect that the cost of accepting credit and debit cards would decrease over time as transaction volume increases, fraud risks go down and technology improves, yet interchange fees continue to skyrocket.”

“On the consumer side, the payments industry is very competitive, with banks vying for customers to carry their cards,” Pfister said. “That is absolutely not the case for American businesses, both large and small, who must accept plastic payments in order to remain viable. Since Visa and MasterCard control over 80 percent of the payments card market, retailers are forced to live by whatever rates and terms the credit card giants dictate.”

Pfister’s comments came in a letter to members of the House Judiciary Committee, which is expected to hold a hearing May 15 on H.R. 5546, the Credit Card Fair Fee Act of 2008.

Sponsored by committee Chairman John Conyers, D-Mich., the bill would require credit card systems possessing “substantial market power” to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would be required to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

Averaging close to 2 percent, interchange is a fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, and, at an annual increase of 17 percent in recent years, the amount is forecast to hit $48 billion this year. The figure would be triple the $16 billion collected in 2001.

Interchange is largely unknown to most consumers because Visa and MasterCard don’t disclose the fee on monthly statements and effectively keep merchants from disclosing it on receipts. Visa and MasterCard effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. The fees amount to more than $350 per household each year.

NRF testified before the Judiciary Committee’s Antitrust Task Force last summer on how Visa and MasterCard banks work through each of the two credit card companies to set interchange rates that all banks agree to charge regardless of which bank’s name is on a card. In doing so, the two card companies each operate as illegal price-fixing cartels in violation of antitrust law, NRF argued.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees - about one in five American workers - and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com 

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