Washington Retail Insight - February 17, 2006

Volume 11, Number 3
February 17, 2006

In Today's Edition:

• White House Seeks NRF Help on Health Care

• Congress Holds First Full Hearing on Credit Card Interchange

• NRF/NCCR Create International Trade Panel on Food

• Congressional Outlook

• NRF Events

White House Seeks NRF Help on Health Care

     The Bush Administration this week sought retailers' aid in efforts to make health care more affordable, calling NRF to a private White House meeting to seek support for an effort to make information about medical services and pricing more readily available.

     NRF President and CEO Tracy Mullin and a small group of other influential trade association heads representing a range of industries concerned about health care costs participated in a discussion with National Economic Council Director Al Hubbard on Tuesday.

     Citing statistics on employers' skyrocketing costs for providing employee health benefits and the growing number of uninsured individuals and families, Hubbard said finding ways to make health care more affordable and available is one of President Bush's top priorities.

     Bush pledged to "help people afford the insurance coverage they need" in last month's State of the Union address, outlining a variety of initiatives including Association Health Plans, medical malpractice reform and expansion of Health Savings Accounts.

     HSAs require consumers to make more decisions about their own health care, but to do so effectively consumers need far more information than is currently available, Hubbard said. Asking consumers to choose whether to have medical procedures done without knowing the cost or other factors is like asking them to buy merchandise in a retail store without knowing the price, he said.

     White House officials are meeting with health care providers and health insurance companies to ask that a wide range of information be made more available, Hubbard said. Prices for services, for example, could be made available on the Internet, and other information could compare effectiveness of treatment options or address quality of care, all leading toward competition that would help bring costs under control.
     Hubbard called on NRF, other business associations and their member companies to support the push for increased transparency. Employers should urge disclosure of more information so their employees can make better-informed choices, he said.

     Health care has been a top issue for NRF and the retail industry in recent years, and Mullin agreed to support Hubbard's request.

     In other activity during the past week, NRF explained retailers' concerns about health care mandate legislation pending in several states during appearances before the Heritage Foundation and the ERISA Industry Committee (ERIC).

     Director of Government Affairs Alison O'Donnell participated in a Heritage roundtable discussion February 10, and described the Tax on Jobs Coalition NRF has formed to fight the state legislation. NRF is concerned that the legislation would drive up costs for employers while doing nothing to address the rising costs of health care, requiring layoffs of workers in some cases in order to meet the new expense. O'Donnell reiterated NRF's concerns during a smaller ERIC meeting the same day.

     A number of states are currently considering legislation similar to a measure recently enacted in Maryland that requires companies with 10,000 or more employees to spend at least 8 percent of payroll on health care benefits. The AFL-CIO is pushing similar legislation in 30 other states, and some of the pending bills would go significantly beyond the Maryland legislation, applying to smaller employers and/or setting higher percentage requirements.

     For more information, contact NRF Vice President and Government and Industry Relations Counsel Maureen Riehl or Director of Government Relations Alison O'Donnell at (202) 783-7971.

Congress Holds First Full Hearing on Credit Card Interchange

     A House subcommittee this week held Congress's first hearing specifically addressing credit card interchange rates, with both merchant and consumer representatives testifying that credit card companies have tried to keep the fees secret from consumers and that the fees take billions of dollars out of the economy each year.

     "Most consumers have no idea that they pay these fees," National Association of Convenience Stores President and CEO Henry O. Armour said. "Our concerns here are similar to our concerns about excise and sales taxes, but at least those taxes are publicly debated and our customers can vote based on their views about their relative costs and benefits. Credit card companies work hard to keep their fees hidden and even if our customers knew about them they can't vote on them."

     Armour's testimony came before the House Energy and Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection, which held a hearing on "The Law and Economics of Interchange Fees" Wednesday morning. The panel touched on interchange's role in rising gasoline prices during a hearing last fall, but this week's session was the first full hearing on the broader effect of interchange throughout the economy.

     NACS is a founding member of the Merchants Payments Coalition, which was formed last year by NRF and other trade associations representing businesses concerned about rising interchange rates.

     NRF Senior Vice President and General Counsel Mallory Duncan, who serves as chairman of the MPC, said afterward that the hearing was an important step in focusing public attention on the once-secret fees.

     "Consumers know about the interest they pay and late charges and over-limit charges," Duncan said. "What they don't know is that credit card companies are collecting a secret checkout fee every time they use their cards. This hearing is going to help bring that secret fee into the spotlight and let consumers know just how much money credit card companies are taking out of their pockets without telling them. The more consumers learn about these fees, the more they're going to demand that credit card companies be honest about them. And once consumers know how much they're paying, competition can help drive these rates down."

     In addition to merchants, the subcommittee heard from consumer groups angered by the rising fees.

     "As consumer advocates, we are gravely concerned about the fairness and legality of bank schemes to increase credit and debit card fee income," U.S. Public Interest Research Group Consumer Program Director Edmund Mierzwinski said, testifying on behalf of his own organization and the Consumer Federation of America. "We agree with merchants' concerns and commend the committee for its inquiry."

     Former Federal Trade Commission Chairman Timothy Muris, testifying on behalf of Visa and MasterCard's Electronic Payments Coalition, defended interchange fees as "essential to the existence of the electronic payment card market."

     Interchange is a fee of about 2 percent that Visa, MasterCard and their member banks charge retailers each time a credit or debit card is used, and effectively require retailers to pass on to consumers. Visa and MasterCard's non-negotiable contracts with merchants require that the fee be built into the advertised price of merchandise, forbid the fees from being shown on receipts, and effectively block cash discounts from being offered in most situations. Other credit card companies don't charge interchange as such because of differences in the way payments are handled, but nonetheless charge similar fees to process transactions.

     Visa and MasterCard kept interchange fees largely secret for years, but the issue has emerged as a major public policy concern in the past year. The Federal Reserve held a conference on the subject last May, and the House last fall passed legislation -- still pending in the Senate -- that would require a Federal Trade Commission investigation into interchange's role in rising gasoline prices. Nearly 50 lawsuits have been filed in federal court claiming that interchange practices violate federal antitrust law.
     Visa and MasterCard alone collected $27.6 billion in interchange fees during 2004, while transaction fees charged by other credit card companies brought the total to $39.2 billion, according to MPC figures.

     For more information, contact NRF Senior Vice President and General Counsel Mallory Duncan or Senior Director and Government Relations Counsel Elizabeth Treanor Oesterle at (202) 783-7971.

NRF/NCCR Create International Trade Panel on Food

     NRF and its National Council of Chain Restaurants division have created a new panel to address international trade issues involving food.

     The NRF/NCCR Trade Subcommittee on Food Products will function as a subcommittee of NRF's International Trade Advisory Committee and will also operate as an NCCR working group.

     The subcommittee will provide a forum to discuss and establish industry positions on issues affecting trade in agricultural and processed food products, an area of increasing relevance to restaurant chains and food retailers. The subcommittee will be chaired by Yum! Brands Inc. Senior Director of Government Affairs Bill Ehrig. Members will meet on an ad hoc basis by conference call and in person when necessary. Companies interested in being represented should contact NCCR Vice President for Government Relations Scott Vinson.

     Creation of the subcommittee is a direct result of last year's joint membership arrangement between NCCR and NRF, and an example of the emerging synergies of the new relationship.

     For more information, contact NRF Vice President and International Trade Counsel Erik Autor at (202) 626-8104 or NCCR Vice President for Government Relations Scott Vinson at (202) 661-3059.

Congressional Outlook:

House: Not yet announced.

Senate: Not yet announced.

NRF Events:

• March 29-30, Taxation Committee, Washington, D.C.
• April 26-28, Committee on Employment Law, Longboat Key, Fla.

     For information on NRF events, contact Eileen Pryor at (202) 626-8114 or pryore@nrf.com.

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