MasterCard Europe’s public relations spin machine is gearing up to assail its core customer base – merchants.
In our photo imaging business, the last thing we would want to lash out at are picture-takers. As our industry transitioned from film to digital, we didn’t fight the trend, but adjusted to what is today a nearly 100% Ecommerce and digital imaging retail business. No more film and interchange fees are just as antiquated too.
From what we are reading, rather than adjusting to the realities of today’s marketplace – where technological efficiencies and in vogue business practices preclude illegal price-fixing – the credit card giants are, instead, sniping at its customers.
Then again, when you study the lack of management at many financial institutions, which are facing billions in antitrust liabilities and billions more in subprime mortgage failures, it is more crystallized than ever that leadership and academic sophistication have taken a back seat to unbridled greed – that’s what happens when you operate an illegal cartel.
According to The FINANCIAL [click here], MasterCard Europe is cautioning consumers that rates won’t drop. RIGHT THEY ARE!, if MasterCard and Visa have anything to do with it. Just study the results of the earlier litigation. But, from a merchant’s prospective it will because that is how a fair market economy operates when there is competition and no price controls. Unlike with Visa and MasterCard, merchants have competition and must adjust their fees to not a cartel pricing structure, but to the marketplace. Either way, until our antitrust litigation is resolved, Visa and MasterCard will be free to continue their corkscrewing interchange fee scheme which generates $40 billion each year for the banks. Last time there was this type of resolve, Visa and MasterCard simply raised other rates to adjust for their penalties, thus more than paying for their fines.The EU decision is indeed a wondrous holiday gift for all consumers and merchants, but one that will not be fully enjoyed for many months. It is another rejection of the justifications offered by MasterCard and Visa for fixing of interchange fees paid by merchants. The Australian RBA, the UK OFT, and the earlier EU decision on Visa all have rejected the networks’ excuses. This decision, and the others, will certainly get the attention of U.S. courts, regulators, and Congress. It has piqued interest by U.S. merchants. It is long past time for the networks to reduce or eliminate interchange fees in the U.S. and worldwide rather than face crippling liability in U.S. courts. There are nearly 100 separate merchant interchange fees in the U.S. and the domestic rates are more than double the interchange fees in many European nations.
The card associations hint they maneuver in a free market, but their multi-million dollar ad campaigns training consumers not to use cash and insist that debit cards be processed at the much higher signature credit card rates are more about market dominance and market power, where prices are illegally fixed by agreement. Of course consumers and retailers will benefit from the removal and decline of a $40 billion annual hidden tax that few understand.When was the last time a $40 billion annual fee did not hurt consumers?
MasterCard is reporting that “interchange fees benefit consumers by fairly sharing the cost of an electronic payment system among the two key beneficiaries of that system – cardholders and merchants.” This is wrong and we are suing Visa, MasterCard and its leading member banks over these illegal fees which are anticompetitive and we assert is in violation of the law.
Way back when the credit card network functioned with antiquated, analog manual imprinters (and provided mountains of carbon copy receipts which had to be mailed away for processing) the interchange fees were cost based and had some justification. Today, the electronic network is so efficient and its costs are a fraction (about 13%) of the total fees charged.
Just look at your local Costco and follow the plunge in flat-screen TV prices. If there was a giant monopoly controlling those electronic items, you wouldn’t have seen the prices fall from $15,000 for a plasma TV to just a few hundred dollars today for a much more efficient and superior flat-screen model. This is the business model Visa and MasterCard should be watching.
As a well-known retailer and Ecommerce business owner, 30 Minute Photos Etc. is always eager to take on the credit card cartel and explain the real facts, as we have been doing for several years and with more than 875 previous WayTooHigh.com news and commentary updates. We don’t invest in controlled market studies, but rather interact with real customers and business owners every day.
In this case, MasterCard even has its holidays wrong. From their prospective, it is not Christmas, but April Fools Day which is upon us; they proclaim that “merchants receive enormous benefits.” They should be explaining more about the $40 billion in fees that are attached to this holiday gift.
According to The FINANCIAL, “Merchants say that MasterCard prohibits them from disclosing to customers how much they pay for accepting payment cards. They know this is untrue. Merchants are free to disclose merchant discount fees, interchange fees, or any other costs they incur. But they choose not to disclose these costs to consumers just as they choose not to disclose any other cost of doing business, or how much they “mark up” their merchandise.”
At best, they are playing verbal shell games a la “Visa and MasterCard don’t collect interchange.” True as a factual statement, but inaccurate. We merchants don’t directly pay Visa and MasterCard the interchange fees, but to a third-party. In or case, it is Chase Paymentech, which is owned by JPMorgan Chase, a named defendant in our merchant interchange litigation and most recently co-owner of both Visa and MasterCard [small word!]. Visa and MasterCard make it impossible for merchants to disclose the exact interchange fees for each transaction.
1) In their operating rules (not in the merchant rules on the website but the hidden rules) they set certain fields that can be on credit card receipts and they do not allow a field for interchange (or merchant discounts or other costs), so we cannot put it on the receipt and comply with the rules;
2) Given both the complexity of the interchange fee schedules (MasterCard’s is 100 pages) and the lack of comprehensible identifiers on individual cards (either physical or electronic identifiers), merchants do not know how much they will be charged on an individual transaction;
3) Visa and MasterCard could make it possible for merchants to identify and determine interchange on the front end but they do not. As a merchant, we can better guess what the winning lottery numbers are than what the exact interchange fee charged per transaction was. There are nearly 100 separate fees and all are bundled into categories on our monthly statement. Visa and MasterCard have pages and pages of confusing fee schedules on its website, which we challenge any merchant to fully understand, down to the penny;
4) A respectable solution, until our litigation is resolved, is for MasterCard and Visa to post the exact interchange fee charged on every debit and credit card receipt. This is the defination of “transparency.” MasterCard’s posted Merchant Rules are so weighty, but not fully followed, even by them. We regularly notice retailers posting minimum purchase requirements, but are unfamiliar whether MasterCard and Visa fully engages each violation. We even pointed out that the American Red Cross had a $5.00 minimum charge on its website. How many restriction signs do you regularly see near the register warning that payment cards are only accepted if above a certain amount? Competition not cartels should control prices, and any smart business will prudently pass on the reduced interchange fee savings to consumers.