Merchants Say Price-Fixing Is Real Problem Creating Higher Swipe Fees

WASHINGTON--(BUSINESS WIRE)--Price-fixing by Visa and MasterCard on behalf of big banks is generating higher and higher swipe fees on credit cards, harming both merchants and consumers, said a merchants group today in a new document made available to its members across the country.

Even though banks set their own prices on every other fee and rate they charge, they each agree to charge the same swipe fees in concert with Visa or MasterCard. While banks complain that merchants might show consumers how large these fees are (and decry it as surcharging), the banks continue to hide their swipe fee price-fixing scheme, said the Merchants Payments Coalition, a group of merchants and retailers concerned about rising swipe fees.

Swipe fees, which have tripled in the past decade, are the charges credit card companies set and banks levy on merchants for accepting their credit cards. These fees are the fastest-growing expense that merchants face (rising faster than health care costs) and are merchants’ second-highest operating fee after labor costs. These fees can be as high as 4 percent of the customer’s bill – the highest swipe fees paid in any country in the industrialized world.

Doug Kantor, MPC counsel, said, “Visa and MasterCard have a stranglehold on the market. They set the fees in secret and banks all charge the same thing rather than competing on price. If they price-fixed consumer fees they would probably go to jail, but because the fee is charged to businesses and hidden they have managed to get away with it.”

Last week also marked the 7^th anniversary of the first congressional hearing on swipe fees before the House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing and Trade. Since 2006, ten hearings have been conducted, leading to important reforms of debit card fees, but little has been done to end the price-fixing of credit card fees.

Such fees have skyrocketed upward even as banks’ costs have been falling, said Kantor. Meanwhile, the banks and credit card companies have stacked the deck against merchants and consumers:

• Merchants don't know what the fee will be when a customer swipes a credit card until they get their bank statement. There more than 240 different fees, depending upon the type of card and the merchant accepting it.
• The banks that issue cards are Visa and MasterCard's customers, not the consumers who use the cards. Under the current system, Visa and MasterCard are motivated to keep banks happy, not consumers.
• Merchants paid banks more than $30 billion last year in credit card swipe fees – money that could have been used to create jobs and lower prices. If Congress would step in and stop the price fixing, U.S. consumers could benefit from reduced swipe fees, as in Europe where they are eight times lower.

Read more about debit and credit reform here: The Facts About Debit Reform and The Facts About Credit Card Swipe Fees and The Facts About Price-Fixing.

The Merchants Payments Coalition - UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees.