NACS: Swipe Fee Settlement a Bad Deal

NACS adds more context to what the announced $30 billion settlement does—and mainly what it doesn’t do.

March 27, 2024

NACS continues to aggressively push back on Visa and Mastercard’s claims that the $30 billion settlement announced on March 27 to limit swipe fees will help retailers—and that it may in fact prevent real change from happening in the marketplace.

The settlement is consolidated with a larger lawsuit by NACS and other retail-focused groups that was originally filed in 2005. The suit, In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, was intended to deal with credit card industry price-fixing. A previously announced settlement in 2012 was rejected by NACS and a majority of other plaintiffs because it fell short of addressing those problems.

At the time of that 2012 proposed settlement, also lauded at the time as the largest in U.S. history, NACS President and CEO Henry Armour noted, “The people asking the court to approve the proposed settlement simply do not represent the interests of most merchants; we do. The proposal represents a minority view and must be rejected.”

The same is true of the settlement today. It would lock-in the Visa/Mastercard system of setting banks’ swipe fees and prevent other lawsuits (like NACS’) from seeking real reforms. The court will have a fairness hearing to consider the settlement and NACS expects large numbers of merchants to oppose any approval of the settlement.

The settlement similarly does not address the lack of competition in the marketplace and is not related to the Credit Card Competition Act. Bipartisan bills introduced in both the U.S. House and Senate would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade.

Swipe fee reform was the top talking point of NACS members who participated in the March 13 NACS Day on the Hill in which members met with their elected leaders on Capitol Hill to talk about business issues important to them.

“The credit card industry has used the proposed settlement as a lobbying tool to tell Congress the fight is over—but it’s not,” stressed NACS Vice President of Government Relations Lyle Beckwith. “We need members to continue to contact their elected leaders and tell them to pass the Credit Card Competition Act.

A news alert sent by NACS on Tuesday reported that one of NACS’ most significant concerns is that the settlement is drafted as “mandatory,” which means that it would bind all other litigants—including the separate suit that NACS and some of its members are pursuing. Those cases could still push for monetary claims, but the settlement (if approved) would cut off any injunctive relief/rules claims.

“Unfortunately, this settlement does not look much better than the one we successfully fought in 2012,” said NACS General Counsel Doug Kantor. “There are some additional provisions, but our initial review shows them to be limited in time and efficacy. We expect most merchant groups will see this the same way and that there will be major efforts to urge the court to reject the settlement.”

Other retail-focused associations shared Kantor’s message.

“This settlement is a bad deal for merchants,” said National Grocers Association Senior Vice President of Government Relations and Counsel Christopher Jones. “A few years of very small relief followed by business as usual is not a good outcome from 20 years of litigation. The settlement does nothing to actually bring competitive market forces to swipe fees or change the behavior of a cartel that centrally fixes rates and bars competition. Instead, it tries to provide token, temporary relief and then allows the card companies to raise rates yet again. Congress needs to act so that we will have real reform that will benefit merchants and their customers.”

Jones and Kantor both serve as executive committee members of the Merchants Payments Coalition, a group founded 20 years ago that 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.

Kantor walked through the details of the Credit Card Competition Act in the Convenience Matters podcast, “The Momentum Behind the Swipe Fee Fight.”