Proposed Interchange Settlement Proves Payments Market is Broken

Arlington, VA – In a letter sent to House and Senate Leadership, the Retail Industry Leaders Association (RILA) described a proposed settlement of lawsuits filed by merchants against Visa and MasterCard over the networks’ anticompetitive interchange practices as proof that the credit and debit markets are broken and in need of reform.

“The decision by Visa and MasterCard to pursue a settlement rather than defend the anticompetitive practices that are the underpinning of their businesses confirms the validity of retailers’ arguments. Further, the networks’ tacit admission proves the foresight of the bipartisan debit swipe fee reforms Congress enacted into law in 2010,” said Katherine Lugar, executive vice president for public affairs.

The proposed settlement is now being reviewed by the named plaintiffs who are required to expressly accept or reject the deal before it can be submitted to a judge for approval. One named plaintiff, the National Association of Convenience Stores has already announced that it has rejected the proposed settlement.

“The merchant community is currently undertaking a methodical process of due diligence to closely understand the terms of the proposed settlement and its long-term implications. If the proposed settlement is ultimately validated, all retailers, present and future, will be bound by its terms,” said Lugar.

Among the many proposed terms that concern retailers are provisions that release Visa and MasterCard from any future claims related to their interchange practices and expansion of network rules to include emerging technologies, such as mobile payments.

“Some merchants have raised concerns with the proposed settlement, including surrendering their right to future legal action against the networks…Additionally, retailers are concerned by the expansion of onerous network rules into emerging mobile technologies that could otherwise revolutionize the point of sale and create meaningful competition in the payments market. These are significant issues and ones that will affect merchants and consumers for decades to come,” said Lugar.

While RILA is not a party to the lawsuit, the association remains at the forefront of retailers’ efforts to reform the broken debit and credit payments markets.

“While disagreement has emerged over the proposed settlement’s benefit relative to these merchant concessions, there is total unanimity on two points. First, the U.S. electronic payments market is broken and it is in desperate need of reform. Second, the retail industry stands unified behind the debit card swipe fee reforms enacted by Congress on a bipartisan basis. As long as the U.S. payments market remains broken and its swipe fees continue to be the highest in the world, the Congress will have an appropriate legislative and oversight role,” concluded Lugar.

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.