Retailer Opposition to Card Settlement Appears Growing
An increasing number of retailers appear to be coming out in opposition to a recent proposed settlement of a large anti-trust case centering on credit card interchange.
At its heart, the complicated dispute addressed both the rules under which the card brands insisted retailers accept their cards as well as the fees they paid for that acceptance. If approved, the settlement will see $8.25 billion eventually move from the card brands and major card issuers into the coffers of participating retailers as well as give retailers the right to surcharge transactions in which consumers use cards instead of cash or checks.
But several retail associations have advised their members to not agree to the proposed settlement and now one of the largest volume retailers, Walmart, has also come out in opposition.
“Walmart, along with a growing number of consumer groups and merchants, is disappointed in the proposed credit card interchange fee settlement,”Walmart wrote in an announcement. “The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year.
"The proposed settlement would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts. We believe the proposed settlement would also constrain emerging payments innovation. As Walmart continues to seek reform that will provide transparency and true competition among financial institutions, we encourage all merchants to put consumers first and reject the settlement.”
But financial analysts at Keefe, Bruyette and Woods, a financial consulting firm, expressed confidence that the settlement would survive retailer grumbling.
“ Within the settlement, there is a termination clause that the defendants can evoke if merchants constituting 25% of volume opt out. In our view, the defendants likely contemplated (ahead of entering into the settlement) that some retailers would take issue with the terms of the settlement and set a fairly high bar in terms of the settlement termination clause,” the analysts wrote in report about the settlement.
“Additionally, a merchant opting out doesn’t necessarily mean they won’t settle, but further negotiation might be necessary. To the extent a merchant opts out, each merchant must carefully consider their relative size and importance before doing so, or they could potentially set themselves up for a costly and possibly unfruitful uphill battle,” the report said.