(WASHINGTON) - The National Retail Federation said the U.S. Supreme Court decision in favor of American Express rules that prevent retailers from encouraging the use of other credit cards with lower processing fees will perpetuate a system that costs merchants and consumers billions of dollars a year.
“(This) ruling is a blow to competition and transparency in the credit card market,” NRF Senior Vice President and General Counsel Stephanie Martz said. “The American Express rules in question have amounted to a gag order on retailers’ ability to educate their customers on how high swipe fees drive up the price of merchandise.”
“By denying merchants the right to simply ask for another card or offer an incentive for using a preferred card, the Supreme Court has undermined the principle of free markets where one company should not be allowed to dictate the practices of an entire industry in order to protect its business model,” Martz said. “This misguided decision represents a missed opportunity to take a stand in favor of free markets and bring soaring credit card fees under control.”
When consumers use a credit card to make a purchase, merchants are charged a “swipe” fee to process the transaction. The fees are a percentage of the transaction and add up to more than $70 billion a year nationwide. Card industry rules have effectively forced retailers to build the fees into the price of merchandise, increasing costs for consumers by hundreds of dollars a year for the average family.
The fees average about 2 percent of the transaction, but American Express has traditionally had higher fees, with Visa and MasterCard in the middle and Discover the lowest. AMEX, Visa and MasterCard all used to have rules prohibiting merchants from encouraging customers to use lower-fee cards, but Visa and MasterCard dropped the restriction in a 2010 settlement with the Justice Department.
AMEX refused to do the same, and was sued by the Justice Department. A U.S. District Court judge ruled in 2015 that the AMEX rules were a violation of federal antitrust law, but AMEX appealed and a three-judge panel of the 2nd U.S. Circuit Court of Appeals ruled in its favor in 2016. Eleven states that had joined the Justice Department lawsuit appealed to the Supreme Court, which agreed to take the case last fall.
NRF has argued in court that the AMEX rules have helped the card company avoid pressure to reduce the fees it charges merchants and, in turn, has reduced incentives for Visa, MasterCard or Discover to do the same. In a friend-of-the-court brief filed late last year, NRF and other retail groups said the AMEX rules “lead to increased prices for all consumers.”
NRF has led the retail industry’s fight against high swipe fees for years, calling for increased transparency and competition that would lead to lower fees. The industry has refused, with each of the thousands of banks that issue credit cards generally charging the same fees for a given brand and type of card.
Sales tax ruling creates ‘fair and level playing field’ between online and local retailers
The NRF issued the following statement from President and CEO Matthew Shay in response to a U.S. Supreme Court ruling in South Dakota v. Wayfair allowing states to require online sellers to collect sales tax the same as local stores.
“Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.
“While today’s decision is a major victory, there’s still work to be done. Congress must now follow the court’s lead and pass legislation implementing uniform national rules that provide consistency and clarity for retailers across the country.”
The court last week upheld a 2016 South Dakota law that requires online merchants with more than $100,000 in annual sales to state residents or 200 transactions with state residents to collect sales tax.
NRF argued in a friend-of-the-court brief last year that the court’s 1992 Quill Corp. v. North Dakota decision was outdated and that sales tax collection is no longer the burden it might once have been due to changes in technology. In the brief, NRF cited a wide variety of software available to automatically collect the sales tax owed, much of its available free or at low cost.
NRF and other retail groups said in a second brief filed this year that lack of uniform collection is “inflicting extreme harm and unfairness” on local retailers by “distorting the retail market in favor of absentee ecommerce.”
Even with the favorable ruling, NRF believes federal legislation is still necessary to spell out details on how sales tax collection will take place rather than leaving it to each of the states to interpret the court’s decision. NRF has been a leading voice for equal sales tax rules for years, saying that Quill gave online sellers an unfair price advantage over local merchants.