Walmart, the big-boxed destroyer of so many smaller businesses, would now like to stand in unison with other retailers in opposition to the proposed “swipe-fee” settlement. A class action anti-trust lawsuit against Visa and MasterCard reached what appeared to be a conclusion earlier this month. Visa and MasterCard were to pay out as much as $7.25 billion, the two would have to temporarily decrease interchange fees, and allow merchants to charge fees to consumers who pay with credit. But Walmart, the single largest retailer in the world, doesn’t like it.
In a brief press release, Walmart explained its position, which is three-pronged. First, says Walmart, the settlement doesn’t change anything about a payments system that it describes as “broken.” Second, the settlement would tie merchants’ hands by making them unable to take legal action against the credit card networks in the future. And finally, they argue that this could potentially stifle “payments innovation.” In closing, Walmart asks for help: “we encourage all merchants to put consumers first and reject the settlement.”
A brave maneuver on Walmart’s part, as it is generally credited with putting many businesses out of business. One might think Walmart would be alone in this crusade.
But it’s not. Target also issued a statement on the settlement last week, which expressed concerns similar to its rival: the payments system is broken, no future legal action, we don’t want surcharges, etc.
Both couched their critique of the settlement in the notion that it’s somehow bad for consumers. While in theory, the costs of interchange should be passed down to consumers, no one really knows whether that’s true, according to Forbes. Interchange fees vary from card to card, bank to bank, network to network, and, perhaps more importantly, not everyone pays with credit and debit cards for everything. It’s not as if merchants can price interchange into every single item they buy wholesale — what they pay can vary from day to day. According to Daniel Fisher at Forbes, “[Swipe fees are] hidden so well that some of the world’s best-paid economists disagree on who pays it, and whether consumers would benefit if it magically disappeared.”
The settlement might make little difference to consumers whatsoever — at least at retail locations. Could it be that Walmart and Target just want to stop paying for interchange? or at least drive it down to a more reasonable level?
Many businesses have stayed cash-only as a way of avoiding paying any interchange. This would seem to indicate that it is merchants who are paying interchange and not consumers, or at least that it’s very hard to tell who’s paying what — even for merchants. After all, it’s frequently businesses like restaurants — where pricing is less scientific than it is in retail — that have these anachronistic cash-only policies.
All this suggests is that perhaps Walmart and Target, loath to tack a surcharge on to their consumers for paying with credit, would rather take the opportunity this proposed settlement provides to take down the tax they pay in interchange for good. It might be self-interest masked as goodwill toward consumers, but that’s not necessarily bad. After all, this is an anti-trust suit: what would anyone gain if business were to continue as usual?