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The Interchange Settlement: Cards Won

Written by Frank Hayes and Evan Schuman
July 18th, 2012

The major interchange fee settlement deal between Visa, MasterCard and various retailers and other industry players was huge, in that it was the result of the big showdown retailers have awaited for years. Winner: card brands. It’s not hard to judge the winner of such an event, simply look at the statements both sides issued afterwards.

Moments after the settlement was announced on on July 13—by the way, the deal being announced on Friday The 13th was just the first of many bad omens—all of the players had their say. (Here’s a full copy of the settlement.) MasterCard: Everyone involved is “best served by an amicable resolution,” and “We believe that today’s settlements should resolve all issues with the merchant community.” (Note: MasterCard apparently also believes in the Easter Bunny.)

Visa: “We are comfortable with the terms, which we do not anticipate will impact our current guidance.” (From a merchant’s perspective, when Visa is comfortable with a retail settlement, that’s another not especially good sign.)

Now let’s hear from the retail groups and one major chain. Target on Friday (July 20) became the first major chain to react to the settlement and it wasn’t happy: “Target believes the proposed interchange fee settlement is bad for both retailers and consumers. The proposed settlement would perpetuate a broken system, restrict retailers from any future legal action and offer no long-term relief for retailers or consumers. In addition, Target has no interest in surcharging guests who use credit and debit cards in order to allow VISA and MasterCard to continue charging unfair fees. We will continue to explore our options while working toward a solution that represents true reform.”

The National Retail Federation (NRF): “The money is significant, but money is only temporary—it’s here today and spent tomorrow. What we need are changes in the rules that bring about transparency and competition that would be here for years to come. The test will be whether the injunctive relief is meaningful. Unless it is, the card market will stay broken, and neither merchants nor their customers will achieve a long-term benefit. In that case, it would be a missed opportunity.”

The Retail Industry Leaders Association (RILA): “Some merchants have raised concerns with the proposed settlement, including surrendering their right to future legal action against the networks. Additionally, retailers are concerned by the expansion of onerous network rules into emerging mobile technologies that could otherwise revolutionize the point of sale and create meaningful competition in the payments market,” and “the U.S. electronic payments market is broken and it is in desperate need of reform.”

The most intense response came from the National Association of Convenience Stores (NACS): “Not only does the proposed settlement fail to introduce competition and transparency into a clearly broken market, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces. This proposed settlement allows the card companies to continue to dictate the prices banks charge and the rules that constrain the market, including for emerging payment methods, particularly mobile payments. Consumers and merchants ultimately will pay more as a result of this agreement—without any relief in sight. Even the monetary agreement in this proposal is a mirage. Merchants won’t get these funds for years and will have paid more than that through increased swipe fees long before they see those funds.”

It’s hard to read those types of statements—and there were many more—from both sides and not have a pretty good sense of which side was high-fiving when the deal was tentatively done. (Note: The judge has yet to sign off, so it’s not fully done yet.)

But in reviewing the full decision, it’s difficult to get a clear sense of what the Plaintiffs thought they had at this point.


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