Washington Retail Insight

Walmart Joins Opponents as Merchants Debate Swipe Fee Settlement

By J. Craig Shearman
Washington Retail Insight
July 26, 2012

The nation’s largest retailer and a trade association representing grocers came out against a proposed settlement of a federal lawsuit over Visa and MasterCard swipe fees this week, with each saying the proposal doesn’t do enough to lower current fees or keep them from rising in the future.

“Walmart, along with a growing number of consumer groups and merchants, is disappointed in the proposed credit card interchange fee settlement,” the company said in a statement on Tuesday. “The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees.”

“NGA joined the lawsuit on behalf of its independent retail grocer members over seven years ago to bring about real reform of the anticompetitive credit card swipe fee system,” National Grocers Association President and CEO Peter Larkin said on Thursday. “This proposed settlement agreement fails in this regard by allowing Visa and MasterCard to continue their dominant anticompetitive practices.”

Walmart and NGA join Target, which said late last week that the settlement was “bad for both retailers and consumers” and would offer “no long-term relief,” and the National Association of Convenience Stores, which said the settlement “actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces.”

NGA and NACS are named plaintiffs in the lawsuit. Walmart and Target are not parties to the suit, but are highly influential as the nation’s largest and third-largest retailers. The second-largest, supermarket giant Kroger, is a plaintiff and welcomed the settlement, telling an Ohio newspaper it “will help reduce our costs and that will benefit our customers in many ways.”

The Vermont Retail Association became the first state-level group to oppose the plan.

“As far as small Vermont retailers are concerned, this settlement doesn’t solve the problem they face, which is the market power the credit card companies have and the amount they can charge,” Executive Director Tasha Wallis said. “There’s nothing in that proposed settlement that address that issue.”

NRF is not a party to the suit and has not taken a formal position, but has been carefully examining the proposed settlement and assessing the industry’s response.

“There is considerable debate among our members over the value of this proposal,” NRF General Counsel Mallory Duncan told the Wall Street Journal.

The agreement would require Visa, MasterCard and some of the major banks that issue their cards to pay $6 billion to settle claims that they engaged in price-fixing. Fees would also be lowered for eight months, a move estimated to be worth $1.2 billion. Nothing would be done, however, to block Visa and MasterCard’s practice of setting a fixed schedule of fees charged by all banks that issue their cards, or to increase transparency by allowing swipe fees to be shown. And retailers would be barred from future lawsuits over swipe fees.

A provision in the settlement allowing retailers to surcharge customers who use a credit card has been widely reported as providing merchants with relief from the fees. But the provision was sought primarily as a bargaining chip for retailers trying to negotiate lower fees, and NRF has emphasized that retailers want to lower prices for customers, not increase prices. Target said in its statement that it would not surcharge customers and Kroger said it was considering offering cash discounts.

U.S. District Court Judge John Gleeson is expected to hear arguments this fall on whether the settlement should be made final and whether the case should be considered a class action.

© 2012 National Retail Federation