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How the Visa/MasterCard antitrust settlement might affect the ATM industry

It's all over but the sniping. But what will the ATM industry get out of the settlement, if anything?

July 19, 2012 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

After a nearly 7-year battle between retailers and major card associations over alleged fee-fixing practices by Visa, MasterCard and issuing banks, the parties finally settled their differences last Friday the 13th.

It remains to be seen which way luck went that day for the ATM industry — or if, indeed, the settlement makes any difference at all.

Under the terms of the settlement, which remains to be approved by a U.S. Federal Court, MasterCard Inc., Visa and the banks that issue their cards will pay retailers included in the class action suit a total of $7.25 billion — a sum that is widely believed to constitute the largest antitrust settlement in U.S. history.

Visa has agreed to pick up $6 billion of the tab, while MasterCard will pay $790 million. Additionally, the card companies will reduce swipe fees charged to merchants by 10 basis points for eight months, which will amount to approximately $1.2 billion in compensation. A further sum of $525 million will be paid out to merchants who individually sued the card companies.

Under the terms of the agreement, merchants will gain two plum concessions from the card companies and banks — the power to negotiate over swipe fees and the ability to add their own surcharges to transactions. 

"[The settlement] will help shift the competitive balance from one formerly dominated by the banks, which controlled the card networks, to the side of merchants and consumers," Craig Wildfang, one of the plaintiffs' attorneys, told Reuters.

American Bankers Association president and CEO, Frank Keating, also expressed satisfaction with the settlement in a statement, though he dismissed the claim that it would do anything for consumers.

“Let’s be clear — retailers, not consumers, benefit from today’s resolution," Keating said in the statement. "This settlement even provides merchants with the ability to impose ‘checkout fees’ on customers just for using credit cards. This type of behavior is nothing new for retailers. Even after receiving an $8 billion annual windfall from the Durbin Amendment, they refused to pass along promised savings to customers and sued the Fed for even more profits."

In its own statement, the Electronic Payments Coalition took a direct swipe at the Durbin Amendment, which legislated a cap to interchange fees in an attempt to bring relief from high surcharges to consumers (which failed, many industry experts have concluded, saying that reductions were not passed on by merchants).

"The deliberate and measured approach of the settlement process is in stark contrast to that of the Durbin amendment, which was passed in the dark of night with no review of its consequences and virtually no public debate ... All parties have endorsed this agreement. The legal process worked and should send a signal to Congress that it is wrong to pick winners and losers in a complex dispute between two industries."

For their own part, MasterCard and Visa said the settlement was the proper conclusion to the case. Noah Hanft, general counsel for MasterCard, told Reuters that the settlement served the company's best interests, while Visa CEO Joseph Saunders went further to say that it was in the best interest of all parties involved.

But the question remains: Though the ATM industry was not one of the parties involved, will the antitrust settlement serve its interests, as well?

ATM Marketplace asked David Tente, executive director of ATMIA US, whether the settlement would affect consumers' choices of payment methods, and whether the merchant surcharges might just increase their use of cash. Tente gave his assessment in an emailed response.

"I think it’s way too early to know the real impact of this agreement in the marketplace — many factors will play into when, where, and how surcharging becomes a reality. The fact that merchants now can apply a surcharge to credit sales doesn’t mean they will. 

"[M]ost retailers factor in credit card fees as a simple cost of doing business.  It has some advantages over other payment methods, and is often considered part of how you make it easy for customers to do business with you. If surcharging does become widespread, consumers who use a credit card for convenience rather than its line of credit feature may be driven to greater use of debit cards."

"It is also quite interesting (and ironic) that this settlement comes at a time when the card schemes have been touting the cashless marketplace. Whether it be due to credit card surcharges or cash discounts, some portion of that transaction volume will likely shift to cash, once again confirming the ubiquity of the world’s oldest form of non-barter payment."

For more on this topic, visit the regulatory issues research center.

About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.

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ATM Industry Association (ATMIA)

The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.

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