The latest attack on the card giants Visa and Mastercard over their alleged anticompetitive tactics was launched yesterday in response to the Biden administration’s hunt for antitrust infractions in corporate America.
The National Association of Convenience Stores filed a letter Thursday with the Federal Trade Commission calling for scrutiny of “anti-competitive” practices of the card companies in routing of credit card transactions on their card networks.
That request takes a significant step beyond retailers’ long-time campaign to curb such activity with respect to the routing of debit card transactions and seeks restrictions that would further hem in Visa and Mastercard businesses.
“Visa and Mastercard provisions preventing network competition for credit card transactions have not yet been the subject of regulatory scrutiny and action,” the Sept. 30 letter from NACS general counsel Doug Kantor said. “The time has come for such action because credit card network exclusivity continues to undermine competition and financial institutions that issue credit cards should have the option to contract with multiple networks whenever they find such arrangements to be beneficial to their businesses.”
A spokesperson for Visa declined to comment. A Mastercard spokesperson didn’t immediately respond to a request for comment.
The NACS letter came in response to the Biden administration’s efforts to reign in anticompetitive conduct in American business, and an FTC call for comments on the issue. A long-time critic of the card companies, Illinois Democratic Sen. Dick Durbin, was seeking the administration’s attention to the industry even before the White House’s July call for more antitrust oversight.
In March, Durbin blasted the card companies at a congressional hearing. "Where is the policing authority to stop this duopoly from doing this to every merchant retailer in America?" he asked.
NACS has been a part of the coalition of retailers engaged in a decades-long effort to restrict the interchange fees, or ‘swipe fees,’ that the card companies are able to charge merchants and retailers when consumers use the cards and send transactions over the card companies' networks.
The merchants and retailers successfully argued a decade ago for the Durbin Amendment, which curtails debit fees and requires card companies to allow competition with respect to routing debit transactions, but they’ve not won such restrictions with respect to credit transactions.
The card companies and their bank issuer allies have pushed back against such restrictions, sometimes arguing that large retailers should have no problem shouldering the fees, which help pay for fraud protection and other security measures.
One organization, the Small Business & Entrepreneurship Council, which include community bank and fintech members, this week issued a call against any new credit card routing restrictions.
The council pointed to chatter in the halls of Congress about legislation that could place new restrictions on routing of credit transactions, but didn’t provide details of those conversations.
“Currently, large retailers are urging their friends in Congress to adopt so-called credit routing requirements,” the council’s CEO, Karen Kerrigan, said in a statement posted on the organization’s web site Thursday.
“These regulations would mandate that more than one payment network be required for each credit card transaction," Kerrigan said in the statement. "This would gift giant retailers with the ability to increase their profits further, which may lead to cutting corners and choosing networks to route transactions that don’t provide the same level of security, or the card rewards and benefits customers prefer.”
Kerrigan argued that the Durbin Amendment, which was part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, didn’t benefit small businesses. “Consumers saw their debit card benefits dissipate, since those card benefits were no longer economically feasible for certain financial institutions to maintain,” the statement said.
The debit card routing restrictions ushered in by the Durbin Amendment continue to be a point of contention between the warring parties. They required that there be two unaffiliated networks available for routing all debit transactions, but proponents of the resulting regulations, now enforced by the Federal Reserve, say the requirements have not been imposed in certain areas, especially online transactions.
That has become an important lapse, they say, at a time when the COVID-19 pandemic has led to a surge in e-commerce as more consumers shop from home.
The Federal Reserve asked for comment earlier this year on a proposal to clarify those debit routing restrictions and got an earful from the two competing camps on the issue.
The latest salvo from NACS may up the ante in the battle over the card networks’ practices.
“It would be fruitful for the FTC to investigate in order to see those contracts, examine the full set of those business arrangements, and determine the root cause of, and ways in which, Visa and Mastercard restrict competition among networks for handling credit card transactions,” said the NACS letter shared with Payments Dive.
Any new probes would be in addition to those reportedly underway at the FTC and the Justice Department with respect to Visa and Mastercard debit routing conduct.
Correction: The story has been updated to correct the name of the National Association of Convenience Stores in the second paragraph.