Monday, November 13, 2006

Interchange: $30 Billion Global Issue (

With more than 550 news and commentary updates since we launched - The Credit Card Interchange Report, we have noticed that our site is blanketing the globe. The recent news from New Zealand and Europe is a perfect example; it is yielding more readers and international interest from abroad.

Our prospective appears to be resonating.

As a retailer, ecommerce business and the very first lead plaintiff in the very first merchant antitrust interchange class-action litigation (June, 2005) we have become the personality behind this global battle against Visa®, MasterCard® and their member banks. But, it is not just us. There are millions of merchants - everyone who accepts Visa and MasterCard who share our outrage over the anticompetitive price-fixing by agreement and unbridled restraints on competition.

Don’t just think Cartier and Bloomingdales. Charitable groups, the mom & pop corner convenience shops in inner cities and even online donations to groups like the American Red Cross are all impacted and pay fees. Sometimes, the most needy groups raising money for important causes are forced to pay the highest rates because they only use the antiquated paper, carbon-copy receipts, rather than electronic terminals for processing Visa and MasterCards. Those rates can be as high as four percent of each dollar donated. Four percent and more!

Advocavy groups for Visa and MasterCard argue that organizations are not forced to accept Visa and MasterCard. Wrong. We would be out of business if those two powerful associations are not honored.

The market power and price discrimination practiced by Visa and MasterCard are now entering a more public arena. Over the years, as technology has lowered most components of processing electronic payments, the card associations went in a divergent direction; they raised fees. Their 80 percent monopolistic share of the market overshadows every other antitrust action. The two clearinghouses operate a network that are taxing consumers and merchants by $30 billion each year.

During the recent run up in fuel costs, they reaped windfall profits without incurring an equal share of expenses. Their solution was to put a fifty dollar limit on interchange fees at service stations. They got half the solution right by imposing a cap on fees, but rather than a fifty dollar limit, it should be at the same level as clearing checks and even debit PIN cards in Canada - zero.

Originally, the fees were designed to cover the costly paper receipt payment transactions. When that went the way of 8-track tapes and vinyl records, their fees went higher. Much higher. In some cases upwards of three-hundred percent higher for debit card fees since the late 1990s.

The named defendants' conspiracy to maintain market power also showers them with substantial economic benefits at the expense of their two core customer segments, cardholders and merchants.

As co-editors of, we hear horror stories every day from our customers who are just as irritated as us. However, we are also eager to learn of even more personal stories about how interchange fees are impacting other retailers.

In January, we will be attending and addressing the International Consumer Electronics Show. The nation's largest trade show is home to retailers who, like us, are forced to accept nearly one-hundred separate interchange fees.

From New Zealand to Europe to Southern California, this battle is gaining attention. It is raising questions about how Visa, MasterCard and its member banks are able to get way with this extraordinary blanket of hidden surcharges that impacts everyone while enriching the banks.

Adding independent board members, flicking off future legal liabilities on public shareholders and posting a myriad of confusing rates on its websites is not the complete solution. Recently Visa and MasterCard proclaimed that they want their rtes to be more transparent. We provided the smartest temporary fix: start publishing the exact interchange fee for every debit and card transaction right on each cardholder's receipt and begin this by "Black Friday, one of the busiest shopping days - the day after Thanksgiving.