"National Restaurant Association Applauds House Panel for Review of Unfair Credit Card Interchange Fees" (NRA release)

July 24, 2007

(Washington, DC) – The National Restaurant Association today applauded the House Judiciary Committee Antitrust Task Force for holding a hearing to review the interchange fee pricing practices of credit card companies.

“Today’s hearing presents an important opportunity for further investigation into an issue that poses an enormous burden to small businesses, including restaurants, across the country,” said Mike Shutley, Director of Legislative Affairs for the National Restaurant Association. “We are pleased that Congress is shedding light on this unfair credit card process, and are confident it will lead to making the system more competitive and transparent so that it better serves consumers and merchants alike.”

The credit card interchange fee is a percentage of each transaction that Visa and MasterCard member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant, and other factors, but averages close to two percent, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.

According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual. The rest goes for marketing, profit and other things like rewards programs.

Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden, and Visa/MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Instead, merchants are effectively left to include the fee in the price of merchandise.

The National Restaurant Association is a member of the Merchants Payment Coalition (MPC), a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards are fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent 2.7 million stores with approximately 50 million employees. www.unfaircreditcardfees.com

[source: NRA News Release, Restaurant.org]


"NACS Calls the Rapid Increase in Card Fees “Unjustifiable and Unsustainable” (Supermarket & Retailer)

July 23, 2007

Noting that the convenience and petroleum retailing industry in 2006 paid more in credit card fees that it earned in overall profits, NACS President and CEO Hank Armour told the House Judiciary Committee’s Antitrust Task Force in written testimony that the “rapid increase in fees is unjustifiable and unsustainable.”

Armour was among those who submitted written testimony before the House Judiciary Committee’s Antitrust Task Force for the July 19 “Hearing on Credit Card Interchange Fees.” Scheduled to testify at the hearing on behalf of the retail community were Mallory Duncan, senior vice president and general counsel of the National Retail Federation and president of the Merchants Payments Coalition, and Steven Smith, president and CEO of K-VA-T Food Stores.

“The [convenience and petroleum retailing] industry posted $4.8 billion in profits last year – which includes profits both at the pump and inside the store – but paid $6.6 billion in credit and debit card fees on its transactions,” noted Armour. “The next time you stop for a fill-up, keep in mind that more of the money you are paying goes to the card companies than the retailer selling you gasoline will get to keep.”

Armour said that Visa, MasterCard and their member banks engage in activities that violate the anti-trust laws of the United States. “The collective setting of interchange fees represents an ongoing antitrust violation by the two leading payment card associations, Visa and MasterCard. These antitrust violations cost merchants and their customers tens of billions of dollars annually.”

The current interchange rates are not justified by costs, noted Armour. “While there may have been some reasonable basis for the size of these fees decades ago, the proliferation of card transactions has driven down per transaction costs. In fact, a bank consulting firm reported last year that the cost of processing transactions was only 13 percent of the interchange fees charged.”

In 2006, the card fees paid by the convenience and petroleum retailing industry increased 22 percent and represented the second largest operating expense in the industry, behind only labor. Overall, Visa and MasterCard have increased their revenues generated from interchange fees by 117 percent since 2001 for a total of $36 billion annually. Armour pointed out that about 60 percent of all interchange in the world is paid by American consumers.

“The United States enjoys the highest volume of credit card transactions in the world. Theoretically, this should lead to significant economies of scale and lower interchange rates. We also have the best technology for processing these transactions and we have very low, and decreasing, rates of fraud. Yet, somehow, U.S. rates are higher than corresponding rates in other countries.”

Armour argued that the reason Visa and MasterCard are able to charge such elevated rates for interchange is because they have market power, which they protect through a complex web of secret rules

[source: Supermarket & Retailer]


July 23, 2007

"House Studies Credit Card Fees" (ConsumerAffairs.com)

July 21, 2007

"U.S. Lawmaker Wants Proof Credit Card Fees Don’t Harm" (Reuters)

July 20, 2007

According to the Reuter’s story, Visa USA® Vice President Rosetta Jones said in a statement the interchange debate is about business decisions and not about antitrust issues. Ms. Jones is in our opinion, unequivocally wrong. As a retailer, I would be out of business is we were not forced to accept the two lead card association’s products. To prove just how wrong Ms. Jones is, we eagerly away Visa’s IPO filing and pages of Risk Factors, which we are eager to profile on WayTooHigh.com. If you thought that last year’s MasterCard® Risk Factors were worrisome, just wait.

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[Repost from Friday, June 22, 2007]

“Visa Reveals Plan to Restructure for IPO” (via AP)


If you thought that the “Risk Factors” that MasterCard® described during its IPO filing was frightening, just wait for Vias’s® list of reasons to get worried too. As reported today by AP, “The offering will also help insulate member banks from billions of dollars in potential legal damages from antitrust claims brought by merchants”. Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public. Reuters is reporting that “the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing…. Visa intends the IPO to fund expansion and help pay potentially heavy legal bills.

“These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.

But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)

Visa’s® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)

MasterCard’s® Legal Bill Could Be $26 Bln (from report in CardLine)

Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)

MasterCard Inc®. IPO, “The Ultimate Hedge Against Litigation” (WayTooHigh.com)

Will “Risk Factors” Doom MasterCard’s® IPO? (WayTooHigh.com)

“MasterCard’s® Legal and Regulatory Risks Threaten … Its Entire Business Model” (BW)

Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)
[source: WayTooHigh.com, with link to AP]

[Commentary, WayTooHigh.com, via Reuter’s article]


US House Judiciary Committee Antitrust Task Force Hearing Comments (

July 20, 2007

Click on each of the below witness names to view their provided testimony.

Mallory Duncan Senior Vice President and General Counsel National Retail Federation

Steve Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.

Edward Mierzwinski Consumer Program Director U.S. PIRG

Tim Muris Of Counsel O’Melveny & Meyers

John Buhrmaster President First National Bank of Scotia, New York

[source: U.S. House of Representatives Committee on the Judiciary website]

"Testimony Today on Interchange Fees" (U.S. PIRG)

July 19, 2007