LITTLE ROCK — Wal-Mart Stores Inc. of Bentonville is among the retailers urging rejection of a proposed $6 billion settlement with card issuers Visa Inc., MasterCard Inc. and major banks over alleged fee fixing.
The proposed settlement, announced July 13, resulted from a lawsuit joined by a large group of retailers that claimed the card issuers conspired to fix retailers’ fees for accepting credit cards. Merchants have long complained about the billions of dollars in “swipe” or “interchange” fees that that they have had to pay, averaging about 2 percent of each purchase price.
Under the settlement, stores would be allowed to charge higher prices for credit-card transactions, and credit-card companies would reduce swipe fees slightly for eight months. Debit-card transactions are not part of the settlement.
Jim Issokson, a spokesman for MasterCard, said via e-mail that the settlement represents a solution reached after years of litigation and months of negotia- tion.
“The provisions of the settlement, including the flexibility for merchants to impose checkout fees, new negotiating tools for merchants and the scope of the release, was reached with the assistance of the court and was supported by the merchant class representing millions of large and small retailers, and prominent trade groups across the country,” he said
Wal-Mart is joined in opposing the settlement by rival discounter Target Corp. of Minneapolis and the National Association of Convenience Stores, a trade group that represents more than 3,700 merchants.
“The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year,” Wal-Mart said in a statement.
“The proposed settlement would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts. We believe the proposed settlement would also constrain emerging payments innovation,” Wal-Mart said.
Target said the proposed settlement would “perpetuate a broken system,” prohibit legal recourse by retailers and offer no long-term relief for retailers or customers.
“We will continue to explore our options while working toward a solution that represents true reform,” the company said.
Trish Wexler, spokesman for the Electronic Payments Coalition, a trade group for credit-card networks, said in an e-mail that retailers, including Wal-Mart, that now object to the proposed settlement “are at absolute odds with the class representative plaintiffs and their counsel and the court-appointed class counsel representing millions of merchants who were intimately involved in the extensive negotiations.”
“It may be true, of course, that Wal-Mart doesn’t perceive the settlement to be in the best [interests] of Wal-Mart and that they want to try to hold out for more money. But Wal-Mart’s individual self-interest is not always parallel with the interests of the millions of other U.S. merchants,” Wexler said.
Tim Yeager, associate professor in the department of finance at the University of Arkansas’ Walton College of Business, said MasterCard and Visa set the fees for usage of their cards. Retailers, he said, contend that they have no bargaining power to bring those charges down.
“What Wal-Mart, Target and other companies are saying is that the settlement goes in the right direction but it doesn’t go far enough,” Yeager said. “It still in their view doesn’t break the pricing power that MasterCard and Visa have over swipe fees.”
Wal-Mart would like to negotiate with banks to get lower fees, “but you can’t do that with the way MasterCard and Visa are set up,” he said.
The Retail Industry Leaders Association, a trade group of the nation’s largest retailers, said credit card companies’ efforts to reach a settlement in the case confirm the validity of retailers’ arguments.
Claudia Mobley, director of the Center for Retailing Excellence at the Walton College, said that based on what she has read, “the settlement makes no sense whatsoever.”
“I think what it means is that we’re going to be in a legal struggle for years to come,” she said.
Information for this article was contributed by The Associated Press.
Business, Pages 25 on 07/25/2012