The National Retail Federation (NRF), the world’s largest retail organization vowed to block the $7.25 billion credit card swipe settlement proposed by Visa Inc (NYSE:V) and MasterCard Inc (NYSE:MA), in connection with the 2005 antitrust lawsuit against the two credit card companies including other major banks.
The NRF pointed out that the proposed settlement does not provide an anti-competitive restriction, and it will not prevent the credit card companies from raising swipe fees in the future. The organization also said there is no provision in the settlement requiring the credit card industry to be transparent and reveal the fees associated to the cards to encourage competition to lower the fees.
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In a statement, Matthew Shay president and CEO of NRF said, “The National Retail Federation categorically opposes the proposed settlement. It does nothing to curb the anticompetitive behavior of Visa Inc (NYSE:V) and MasterCard Inc (NYSE:MA), and instead ensures that swipe fees paid by retailers and their customers will continue to rise while barring any future legal challenges. The proposal is a lose-lose-lose for merchants, consumers and competition. NRF will take any and all steps necessary to oppose the settlement as it is currently proposed and will work toward real reform of the swipe fee system.”
He also said the board of the NRF approved a resolution to take the necessary steps to reach a reasonable solution for the retail industry. The NRF is exploring legal options to intervene in the impeding settlement, because it is not part of the lawsuit.
In an interview with Bloomberg, Mallory Duncan, general counsel of NRF said the group will oppose the settlement “firmly and loudly.” Duncan said, “We will try to find the most forceful way we can to let the court know that this deal is so unfair that it needs to be rejected at the outset.”
On the other hand, Trish Wexler, spokesperson for Electronic Payments Coalition, an organization in favor of the settlement said NRF and other groups have “political ulterior motives” in objecting the settlement agreement.
In a statement Wexler said, NRF was “absolutely aware of the negotiations, were intimately involved in the matter, and had ample opportunity over the years to weigh in through various channels, intervene, or become a party — but clearly chose, not to for tactical reasons.”
In July, Wal-Mart Stores Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) said they will not accept the credit card swipe fee settlement.
Target said the settlement does not offer a long-term solution to retailers and consumers, it will allow credit card companies to continue to practice the broken system, and it will restrict retailers to pursue legal actions related to the problem.
On the other hand, Wal-Mart Stores, Inc. (NYSE:WMT) said the settlement agreement has no provision restricting the credit card companies from continuously increasing the hidden swipe fees, and it will only hinder payment innovations such as mobile wallet payments via smartphones.
A Federal Court in Brooklyn, New York will review the $7.25 billion proposed by Visa and MasterCard Inc (NYSE:MA). If the court approves the agreement, the antitrust allegations against the companies will be dismissed.
American Express Compan (AXP), another large credit card giant, is not involved in the lawsuit.
In some good news for Visa, this morning Visa released volume data for July and August .
For August, US payment volume growth was 2% yoy and -1% in July vs. our 4Q forecast of 0.3%. On a product basis, US credit payment volume growth finished up 12% yoy (vs. +7% yoy in July) and debit payment volume growth was negative 6% yoy (vs. -8% in July) vs. Goldman Sachs 4Q forecasts of 9.0% and -6.7%. On a constant-currency basis, global cross bordervolume was up 13% yoy vs. 9% in July and our 4Q forecast of 12% yoy. Processed transactions posted growth of 2% yoy on a global basis vs. 2% in July and Goldman Sachs 4Q forecast of 5.4% yoy.
Goldman notes the Implications:
Overall, we view V’s volume and transaction update as positive given improvement in both credit and debit volume growth. We remain Buy rated on V as the continued momentum in US credit and cross-border activity should continue to power the model over the long term. Although we acknowledge that the ongoing shift in US debit market share (post the end of exclusivity) will continue to hamper headline volume and transaction volume results, we see little risk to revenue growth (recall that US PIN debit represents only 2% of total revenue). While consumer spending remains a swing factor for our model, we believe that today’s volume update provides a good reminder of the resiliency of underlying global payment and transaction volume growth. Looking ahead, we believe V shares will find their cues from the success of new pricing initiatives with merchants and processors, and continued contribution from international.