Retailers Cheer DOJ Credit Card Settlement, With Some Caveats

The retail industry was heartened by the U.S. Department of Justice Antitrust Division submission of a final consent decree in its enforcement action against Visa and MasterCard to address some anticompetitive practices connected with credit cards, although some doubts as to the settlement's ultimate effectiveness remain.

“This is just a first step, but a vital one, to help alleviate some of the card network restraints on FMI members’ ability to provide discounts to their customers,” said Leslie G. Sarasin, president and CEO of the Arlington, Va.-based Food Marketing Institute (FMI). “This enforcement action is focused on anticompetitive practices related to credit cards and reinforces the need for credit card transactions to be subject to the same reforms authored by Sen. Durbin related to debit cards.”

Added Sarasin: “Neighborhood supermarkets look forward to continued scrutiny of anti-competitive practices with credit and debit cards that were not addressed in the department’s enforcement action. Visa and MasterCard have hundreds of pages of non-negotiable, take-it-or-leave-it network rules that have stifled and continue to stifle market competition.”

The trade group expressed the hope that the DOJ’s action would begin to create more possibilities for competition in the marketplace.

The Retail Industry Leaders Association (RILA) was similarly pleased by the development, but noted that merchants still had concerns about their ability to broadly apply the settlement to benefit consumers.

“We applaud the Department of Justice for attempting to address the major anticompetitive practices regarding steering and discounting; however, serious doubts remain as to whether the settlement offers merchants the tools they need to take action,” explained Katherine Lugar, EVP for public affairs at Arlington-based RILA. “Visa and MasterCard have a long history of handcuffing merchants through the anticompetitive network rules. We expect Visa and MasterCard will continue to tie merchant's hands by not providing the information needed to give consumers the credit card discounts and other valuable incentives as intended by this remedy.”

RILA pointed out that the settlement depends on a complicated, as-yet-unavailable electronic system to determine the interchange cost at the point of sale, and doesn’t require that cards visually display their rewards status or interchange cost. Therefore, neither retailers nor consumers will know, with any kind of ease, the interchange cost of an individual card and whether it qualifies for a discount.

“Throughout the process, merchants have been committed to providing the Department of Justice with the necessary technical input to make the settlement practically effective and provide consumers with he intended benefit,” said Lugar. “Unfortunately, the settlement perpetuates Visa and MasterCard's system of ever-changing swipe fees and hidden charges, and allows them to escape providing merchants with essential information to implement the settlement, rendering key provisions largely ineffective for merchants and consumers.”

Last October, DOJ initiated legal action against Visa, MasterCard and American Express for anticompetitive practices that keep merchants from guiding customer to low-cost payment options. At the same time, a preliminary settlement of the case against Visa and MasterCard was revealed, leaving the DOJ to pursue action against American Express in court.

This ad will auto-close in 10 seconds