NACS’ General Counsel Doug Kantor is testifying on behalf of the convenience store industry and the Merchants Payments Coalition in today’s Senate Judiciary Committee hearing, “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems.” It is the first time since 2006 that the committee debated the anticompetitive practices of the credit card industry.
In his written testimony, Kantor underscored the exorbitant swipe fees levied on retailers and how those fees are the direct result of price-fixing by Visa and Mastercard. Through their operating rules, the global networks go even further to insulate the high fees they set from market forces by ensuring retailers have no choice but to accept all of their cards, even those with the highest swipe fees. Ultimately, this broken system acts as an inflation multiplier driving up the price of goods paid by Americans and results in American businesses paying the highest swipe fees in the industrialized world.
“In 2021, the fees paid by convenience retailers to accept payment cards jumped by 26.5%. Not only that, but the rate of increase has been even higher thus far in 2022—and that was even
before Visa and Mastercard moved forward with rate increases in April that, combined with the rate increases that Visa publicly said it would delay last year, amount to an additional $1.2 billion per year in additional fees. These increases are completely unsustainable,” noted Kantor.
“At the same time that retailers’ margins are getting squeezed, their credit card fees are rising because they are a percentage of the total transaction amount. That means there have been many times during the past few months when retailers were paying more in swipe fees—often about 10 cents per gallon—than they were ultimately making on those sales. That makes no sense given the costs retailers incur and risks they take to maintain a site with underground storage tanks, transport fuel, and sell it to customers—often staying open 24 hours per day in the midst of a labor shortage and, in the past two years, a pandemic. Processing those transactions should not cost more than the profits that can be made after all of that effort,” Kantor said.
Ultimately, these excessive swipe fees hurt consumers as they drive up the price of goods. Kantor noted that the pre-tax profit margin for convenience stores is approximately 2.47%. “With those margins, which are around or below the level of swipe fees these businesses pay, those fees must be passed on to consumers or retailers would go out of business,” noted Kantor.
Other witnesses in the hearing were Laura Shapira Karet, chair and CEO of Giant Eagle; Charles Kim, executive vice president and chief financial officer of Commerce Bancshares; Linda Kirkpatrick, president of Mastercard North America; Ed Mierzwinski, senior director of the Federal Consumer Program at U.S. PIRG; and Bill Sheedy, senior advisor to the chairman and CEO of Visa.
Last month, a bipartisan, bicameral letter from Senator Dick Durbin (D-IL), Senator Roger Marshall (R-KS), Rep. Peter Welch (D-VT) and Rep. Beth Van Duyne (R-TX) was sent to Visa and Mastercard urging them not to move forward with their fee increases. Despite the letter, the global networks went forward with fee increases on April 23.
For nearly two decades, NACS has been a leading voice in the fight against the credit card industry and their exorbitant swipe fees. NACS was a founding member of the Merchants Payments Coalition.