NACS, NACDS, NCPA, NCGA File Suit Against Credit Card Companies
By George Anderson
The National Association of Convenience Stores (NACS), the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA) and the National Cooperative Grocers Association (NCGA) have filed a class-action, antitrust lawsuit against Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, J.P. Morgan, Chase, Fleet Bank, Capital One and other banks alleging the parties are in collusion in setting interchange fees for credit card payments.
Interchange fees, according to the associations involved in the suit, represent the largest component of credit card fees and, as such, have impact with consumers. The groups claim that interchange rates in the U.S. are among the highest in the world and cost the average household $232 last year.
“The credit card interchange system serves as a hidden tax, both on merchants and consumers, and raises the costs of all products regardless of the form of tender,” said Hank Armour, CEO of the National Association of Convenience Stores (NACS). “Fees have rapidly increased over the past several years, despite efforts by individual convenience stores to control these costs or make the competitive market work.”
Visa spokesperson Paul Cohen told Reuters, interchange rates are “a fair mechanism for fueling growth and sharing system costs.”
John Rector, general counsel of the National Community Pharmacists Association (NCPMA) said in filing the suit, “We are looking for long-term reform of the credit card interchange fee system. The current system discriminates against small, independent businesspersons, and there is no basis for that discrimination. We ultimately seek a competitive and fair interchange fee system. Interchange is much higher in the United States than any other country, and there is no legitimate basis for that.”
Moderator’s Comment: Are interchange fees a “hidden tax” as alleged by the associations bringing the lawsuit against Visa, MasterCard, et al or are they
“a fair mechanism for fueling growth and sharing system costs” as maintained by the credit card companies and banks? What impact do interchange fees have on retailers, consumers
and financial institutions?
Back in July, a judge from the federal court in the Northern District of California dismissed an antitrust lawsuit brought on behalf of merchants against
Visa, MasterCard and a number of banks over interchange fees. According to Judge Jeffrey S. White, the merchants did not have a basis for bringing their claim under Section 1
of the Sherman Act. The court also ruled that the retailers had no factual basis to support their claims that the credit card companies were setting the fee rates. –
George Anderson – Moderator
- Retail groups sue Visa, MasterCard and banks – Reuters/USA Today
- Groups File Antitrust Case Against Visa, MasterCard and Major U.S. Banks – National Association
of Chain Drug Stores
- Retailer Lawsuit Challenging Interchange Dismissed by Federal Court
in California – MasterCard International