Merchants Call Interchange Fee Practices Violation of Antitrust Laws

WASHINGTON–In testimony prepared for delivery Thursday at a hearing of the House Judiciary Committee’s Antitrust Task Force, Mallory Duncan, senior vice president and general counsel of the National Retail Federation and chairman of the Merchants Payments Coalition (MPC), called the collective setting of interchange fees by Visa and MasterCard a violation of federal antitrust laws that costs merchants and their customers more than $36 billion every year. “The collective setting of interchange fees by Visa and MasterCard represents an on-going antitrust violations and it costs merchants and their customers tens of billions of dollars annually,” Duncan said. “These fees are in addition to the late fees, over-the-limit fees and other card fees with which consumers are only too familiar.” The interchange fee is a percentage of each transaction that Visa and MasterCard and their member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant and other factors, but may be up to 2% or more. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17% from 2005 and 117% since 2001. According to a recent study cited by the MPC, the credit card companies and their banks spend only about 13% of the interchange fee on actual transaction processing. The rest goes for marketing, profit, and other items such as rewards programs.