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    Merchant Groups Adjust Credit Card Complaint to Include Debit Cards

    Credit card fee battle rages on; more plaintiffs added to consolidated complaint.

    ALEXANDRIA, Va.--An amended consolidated complaint against Visa, MasterCard and several major banks was filed by a broad range of merchant groups, including the National Association of Convenience Stores (NACS), in the Eastern District of New York earlier this week.

    This consolidated complaint, filed April 24, updates an earlier complaint filed in September 2005 by NACS and other groups that allege that Visa, MasterCard and the banks engage in collusive practices to fix credit card interchange fees. The complaint updates the earlier complaint to include debit cards, and additional merchant associations joined as plaintiffs.

    “We believe that price fixing of interchange is equally as problematic in debit cards as it is in credit cards,” said Henry O. Armour, NACS president and CEO. “Because debit cards are commonly used at convenience stores, especially at the gas pump, this is a significant amendment to the complaint.”
    The complaint in the lawsuit seeks a permanent injunction barring the companies from continuing practices that violate antitrust law.

    Interchange, a fee that is collectively set by Visa and MasterCard’s member banks, is a percentage of each transaction that banks collect from retailers every time a credit or debit card is used to pay for a purchase, adding up to billions of dollars each year.

    The complaint alleges that Visa and MasterCard are able to set these fees without apparent respect to the typical market forces.

    “The system is clearly broken,” said Mallory Duncan, chairman of the Merchants Payments Coalition (MPC), a coalition of some 20 trade associations representing retailers, restaurant, supermarkets, drug stores, convenience stores, gas stations, on-line merchants and other businesses that accept debit and credit cards that is fighting for a more competitive card system. “Visa and MasterCard compete to charge the highest interchange fees--fees that banks don’t pay but all consumers do. In virtually every other marketplace, competition results in lower prices, but not with interchange fees.”

    In addition to a fairer fee structure, the MPC is calling for more transparency as it relates to the “hidden” nature of the rules that govern interchange.

    “It’s not just that the fees are unfair, they are hidden,” Duncan said. “Credit card companies can increase their interchange fees--which can approach 2 percent or more on each transaction--by any amount, and they forbid merchants from disclosing the fees they charge.”

    Several members of the MPC are litigants in the lawsuit, including NACS, the National Grocers Association, the National Restaurant Association and the National Association of Travel Plazas and Truckstops.

    The case is expected to go to trial in 2008.

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