Merchants Ask FTC to Probe Card Firms’ Role in Gas Price Hike

NACS points to credit card swipe fees as contributing to higher prices at the pump.

November 18, 2021

credit card at gas stations

WASHINGTON—The Merchants Payments Coalition yesterday called on the U.S. Federal Trade Commission to investigate the credit card industry, saying swipe fees charged to process transactions have contributed to increases in gasoline prices.

“Card fees are up nearly 20% for gasoline retailers this year,” said Doug Kantor, NACS general counsel and MPC executive committee member . “The card industry is making more right now from gas sales than local gas station owners. That’s not right.”

The MPC move comes as President Joe Biden yesterday asked the FTC to investigate whether oil companies are engaging in any illegal conduct that has led to higher gas prices.

The national average for a gallon of regular gas is currently $3.41 per gallon, according to AAA. With the swipe fee that banks charge merchants to process Visa and Mastercard credit card transactions averaging 2.22%, that amounts to 7.6 cents per gallon, up from 4.7 cents per gallon a year ago when gasoline averaged $2.12 per gallon. Including those and other expenses, fuel industry pretax profits are currently less than six cents per gallon.

Swipe fees are among fuel merchants’ highest costs and drive up prices paid by consumers, adding about 75 cents to a 10-gallon fill-up. Gas stations paid $10.7 billion in swipe fees in 2020, and higher gas prices have increased swipe fees paid so far this year by 19.5%. That puts 2021 on pace to total more than $12.5 billion, according to NACS.

In September, MPC member NACS asked the FTC to investigate anticompetitive tactics used by Visa and Mastercard, including rules that keep independent card processing networks like Star, NYCE or Shazam from processing credit card transactions. A 2010 federal law requires that debit card transactions be able to be routed to at least two unaffiliated networks for processing rather than just Visa or Mastercard but does not apply to credit cards. The Federal Reserve is currently considering an update to regulations to make sure payment network routing choice is enabled online and for smartphone transactions the same as in stores after merchants complained that card companies and banks have largely blocked it online.

Beyond gasoline, processing fees for all types and brands of credit and debit cards cost merchants $110.3 billion in 2020, up 70% over the previous 10 years, according to the Nilson Report, a newsletter that covers the card industry. The fees drive up consumer prices by more than $700 a year for the average family, according to payments consulting firm CMSPI.

The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.

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