I've always believed in an honest day's pay for an honest day's work. Everyone from the people at our stores who keep the Slurpees flowing to the delivery truck drivers benefit from the patronage of our customers. How much they get paid is a simple equation of capitalism: They receive what the competitive market will bear for their services.
This all works out well except for the take that the big banks and credit card companies get every time a customer pays via credit or debit. Visa and MasterCard control 80 percent of the credit card industry in America so they decide how much of a cut the big banks make off of every transaction (the "swipe fee").
These fees are now more than $50 billion a year and have tripled in less than a decade. They are the second-highest operating expense (behind only labor) and a crushing drag on business. According to National Retail Federation estimates, swipe fees cost the average U.S. household $427 a year and hurt retail sales because consumers buy less when prices go up.
Other convenience store owners like me, as well as the National Association of Convenience Stores, National Grocers Association, Walmart, Target and many more, have had enough. We filed a lawsuit in federal district court and are ready to go to trial to stop what we see as illegal price-fixing.
However, MasterCard and Visa are trying to do an end run around the issue. They are proposing a settlement that will let them each keep price-fixing swipe fees for the banks and keep the fees going up without any market forces to keep them in check. Hey, if I were them, I'd love to cut an agreement like this.
In addition, the proposed settlement requires class members to release Visa and MasterCard from liability, forever, for any anti-competitive rules currently in place (including the interchange or swipe fee rules) and/or any "substantially similar rules" instituted at any time in the future.
The proposed settlement also risks giving Visa and MasterCard a free hand to strangle newly emerging competition in the mobile payments market.
This is a bad deal.
You hear a lot in the media about government intrusion and overbearing bureaucrats. This is ten times worse than anything they could dream up in Washington.
I'm urging all who have accepted Visa or MasterCard credit or debit for payment since Jan. 1, 2004 (including online merchants) to join me in objecting and opting out of the settlement. Anyone with a merchant services account is a member of the class in this antitrust case. Others in the class include doctors, pharmacists, dentists, veterinarians, insurance companies, non-profits and colleges. The website Merchants Object (www.merchantsobject.com) provides a quick, easy way to let the court know what merchants really think about this bogus settlement.
The exact amount of a swipe fee can range from about 1.5 percent for an ordinary card to 4 percent or more for premium rewards cards, and also varies according to a merchants' card volume and other factors.
The schedules of fees are set centrally by Visa and MasterCard, with all banks that issue the cards agreeing to charge the same fees. Banks do not compete over the fees and refuse to negotiate with retailers.
"This is a stunning giveaway to Visa and MasterCard," Sen. Dick Durbin (D-Ill.) said in a statement for the Congressional Record. "This is a bad deal, but it is not a done deal. The merchant plaintiffs still have to decide if they will support it."
Sen. Durbin is right and that's why it's time to mobilize.
The benefit of objecting is that we may be able to persuade the court that the proposed settlement is unfair and that it should not be approved. By going a step further and opting out of the settlement, we'll be able to preserve the right to sue for more damages for conduct that occurred before Nov. 27, 2012. It also sends a strong message to the court that this settlement cannot go through.
At my store, I like to say we don't just sell Snickers bars - we sell convenience. The consumer is gladly willing to pay for that convenience and credit and debit cards have their place, of course. But when the cost of simply performing a transaction becomes unbearable, it's time to reassert the basics of capitalism to the folks who run Visa and MasterCard.
Dennis Lane is the former chairman of the National Coalition of Associations of 7-Eleven franchisees and a former member of the Charitable Alliance of Retail and Restaurant Executives. He owns and operates a 7-11 in Quincy, Mass., which he bought in the 1970s.
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