Visa Inc. (V), MasterCard Inc. and some of the biggest U.S. banks agreed to a settlement of at least $6.05 billion in a price-fixing case brought by retailers over credit-card swipe fees.
The total value of the settlement is $7.25 billion to a class of about 7 million merchants in the U.S. that accept Visa and MasterCard credit cards and debit cards, a law firm for the merchants, Robins Kaplan Miller & Ciresi LLP, said in a statement.
The agreement, which provides for a temporary reduction in rates for merchants and allows them to impose surcharges on customer purchases, follows a seven-year legal battle with U.S. retailers that accused the two largest payment networks of conspiring with banks to fix swipe fees, or interchange.
There has been a clause in merchant agreements basically forever (since I started taking plastic anyway) that forbid the imposition of surcharge for the cost of credit card processing.
The problem with plastic from the merchant perspective is that there is typically a per-ticket charge (e.g. 25 cents) plus a percentage discount charge (e.g. 2%) applied on the entire sale. This is why you see signs in stores (which are entirely forbidden, incidentally, in merchant agreements!) saying "No credit cards under $10" and similar. If you can use plastic to buy a candy bar the merchant might only get half of your purchase or less!
This is effectively a hidden tax and it's paid by everyone, including those who pay cash and thus don't use any of the services involved. And for that reason it's wrong.
There are some states where legal prohibitions will still prevent card surcharges, but everywhere, until this settlement, they were prohibited by merchant agreement (contract.) This is why you'll see "3 cent discount for cash" on gas pumps (it's ok to do that) but not "2% more for credit cards." It's all in the wording, you see.
Will this really matter where it counts -- with consumers? We'll see. I'm skeptical that the savings will make it to the consumer, for the simple reason that it has always been legitimate for companies to offer a discount for cash, and yet damn few do so.
Nonetheless the more monopolist barriers that fall, the better.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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