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A settlement involving the top two payments networks over their merchant acceptance policies gives retailers more clout to promote the use of cheaper cards, but an analyst doubts many businesses will change their practices.
October 4 -
While the Justice Department's antitrust lawsuit against three major card networks appeared to bolster merchants' case for regulating interchange fees, it may also have undercut a push for legislation targeting the issue.
October 5 -
In theory, retailers just gained significant ground in their fight against payment card fees. But whether the government's antitrust settlement with Visa Inc. and MasterCard Inc. will hurt card issuers depends on the extent to which retailers can overcome logistical concerns and influence consumer behavior.
October 5
Merchant groups say a U.S. Justice Department settlement does not go far enough to prevent Visa Inc. and MasterCard Inc. from engaging in anti-competitive practices.
The DOJ on Tuesday filed for final approval of a deal first struck last October with the two credit card networks to eliminate prohibitions they historically have had on retailers' ability to steer customers to cheaper forms of payment.
Under the settlement Visa and MasterCard are required to allow merchants to offer discounts and post signs to encourage customers to use one network's card over another as well as pay with cash or check instead of a card. For instance, a store could offer a cheaper price to consumers who pay with a non-rewards credit card versus one with rewards, which carry higher fees for merchants.
However, groups like the Retail Industry Leaders Association and Merchant Payments Coalition say the settlement doesn't provide enough relief.
"Visa and MasterCard have a long history of handcuffing merchants through the anticompetitive network rules," Katherine Lugar, the executive vice president for public affairs at RILA, said in a press release Tuesday. "We expect Visa and MasterCard will continue to tie merchants' hands by not providing the information needed to give consumers the credit card discounts and other valuable incentives as intended by this remedy."
The Merchant Payments Coalition, a consortium of other retail groups and merchants, echoed RILA's sentiment in a statement on Tuesday.
One of retailers' main concerns is whether they will have the ability to determine which cards carry higher fees when a customer presents them at the point of sale.
In a filing in U.S. District Court for the Eastern District of New York, the DOJ said the issue, which RILA and other groups raised in public comments filed in response to the proposed deal, was an important one but said Visa and MasterCard will have electronic services that will enable retailers to "differentiate among card types."
Visa already offers a "product eligibility inquiry service" that enables a merchant to send a data request to Visa's network to determine the interchange fees a card carries, the filing said. MasterCard plans to offer a similar service soon.
Both payment networks have agreed to offer the service to merchants and their acquiring banks for free, though acquiring banks would not be prohibited from charging their clients for the service, the DOJ said.
Visa and MasterCard are prohibited from blocking acquiring banks from providing the information to merchants, the filing said.
The settlement stems from a lawsuit the DOJ filed against Visa, MasterCard and American Express Co. in October. The agreement does not include Amex, which is fighting the suit.
The steering rights under the settlement mirror those included in the Dodd-Frank Act provision regulating interchange fees on debit cards. The provision also intends to give merchants the ability route transactions over debit card networks that charge lower fees.
Neither the DOJ settlement nor the Dodd-Frank provision allows merchants to promote cards on the basis of the bank issuing the cards. They also do not allow merchants to surcharge customers for paying with a more expensive form of payment.
