The proposed $7.25 billion settlement that retailers hammered out with Visa, Mastercard and the banks that issue their credit cards over swipe fees was generally hailed as positive when the news was announced last week. Some, however, see the deal as good for the Goliaths and not so much for the Davids in the marketplace.
To take a step back, the proposed deal, which still needs to be approved by a federal court, would pay $6 billion to plaintiffs in the case. Individual stores that sued would be paid $525 million and the card companies agreed to reduce swipe fees by 10 basis points for a period of eight months.
Plaintiffs in the case included Kroger, Rite-Aid, Payless ShoeSource, the National Association of Convenience Stores (NACS), National Grocers Association (NGA) and the American Booksellers Association.
"This is an historic settlement," Bonny Sweeney, a lawyer for the plaintiffs, told Reuters. "In addition to refunding billions of dollars to retailers that paid artificially inflated interchange fees, the reforms will create real price competition, leading to reduced card-acceptance fees for retailers."
One of the biggest changes that comes with the deal is that retailers now have the ability to charge more for credit card purchases while giving consumers a break for paying with cash.
Russell Walker, a professor at Northwestern University's Kellogg School of Management, said the ability to threaten higher prices for credit card purchases would benefit chains.
"If you are a larger retailer, you can expect more power," he told Bloomberg News. "For the smaller retailer, it will be harder to be treated in the same manner."
NACS was most vocal in its opposition to the deal. The association's president, Tom Robinson, who is also president of Robinson Oil, said, "Not only does the proposed settlement fail to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces."
Peter Larkin, president and CEO of NGA, was withholding judgement for the moment.
"We took this action on behalf of independent retail grocers to seek fundamental restructuring and reform of anti-competitive credit card interchange fees and payment rules," Mr. Larkin said in a statement. "While we have knowledge of the framework of the settlement, we have not seen the final language or had a chance to assess its impact on our members."