Retailers say US should follow UK example on anticompetitive credit card swipe fees

"It's time for U.S. authorities to take a very close look at the payments industry."

NRF General Counsel Stephanie Martz

WASHINGTON – The National Retail Federation today welcomed a ruling by the U.K. Supreme Court that the way Visa and MasterCard set “swipe” fees charged to merchants to process credit card transactions is a violation of European Union antitrust laws.

”U.S. policymakers should follow the U.K. court’s example and recognize that the way these fees are set is anticompetitive and a violation of our antitrust laws as well,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said.

“When two companies effectively control the operation of the largest portion of the payments system along with its fees and rules, that clearly discourages competition,” Martz said. “Visa and MasterCard have long used their market power to hold back would-be competitors and discourage innovation that would ultimately save merchants and consumers billions of dollars. Congress directed the Federal Reserve to address U.S. debit card fees a decade ago, the European Union capped card fees five years ago and now the United Kingdom has weighed in on the side of competition. It’s time for U.S. authorities to take a very close look at the payments industry.”

The U.K. Supreme Court on Wednesday upheld a lower court ruling in a lawsuit brought by British merchants, saying Visa and MasterCard “fix a minimum price floor” for credit card processing fees that is “determined by collective agreement rather than by competition.” The case now goes to the U.K. Competition Appeal Tribunal to determine damages. While the ruling has no effect in the United States, the case has a number of similarities to disputes over card fees here.

U.S. retailers have long argued that the way Visa and MasterCard set the swipe fees charged by most banks that issue their cards is a violation of U.S. antitrust law. In 2019, a federal judge approved a $5.5 billion settlement in a lawsuit brought by merchants against Visa and MasterCard over the issue. NRF is not a party to the lawsuit, parts of which are still pending, but has sought action to bring the fees under control.

Officially called “interchange,” swipe fees are a percentage of the transaction taken by banks each time a credit card is used to pay for a purchase, averaging about 2 to 3 percent in the United States. Banks previously took a percentage of debit card transactions as well, but those fees were capped at a flat fee of 22 cents plus 0.05 percent by the Federal Reserve in 2011. In the European Union, where the fees are capped, they average 0.8 percent for credit cards and 0.37 percent for debit, according to research firm CMSPI.

U.S. Visa and MasterCard credit card swipe fees totaled $67.6 billion in 2019, according to the Nilson Report, a trade publication that covers the payments industry. Debit card fees for the two brands amounted to another $19.7 billion, and swipe fees for all payment cards – including American Express, Discover and private-label cards – totaled $116.4 billion.

For many merchants, the fees are their second or third-highest expense after wages and employee health care, and card company rules for giving cash discounts are complicated. Consequently, the fees are built into the price of merchandise, driving up prices paid by the average household by hundreds of dollars a year.

About NRF
The National Retail Federation, the world’s largest retail trade association, passionately advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs — 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.