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National Grocers Association criticizes $7.25B swipe fee settlement

The National Grocers Association, a party to the merchant lawsuits filed against Visa and MasterCard, said on Thursday that it opposes the $7.25 billion settlement between retailers and card processors reached earlier in July.

A number of groups, including Wal-Mart and Target, have also criticized the settlement, which is still awaiting a judge’s approval.

Peter Larkin, the president and CEO of NGA, said that the group “joined the lawsuit on behalf of its independent retail grocer members over seven years ago to bring about real reform of the anticompetitive credit card swipe fee system,” The Wall Street Journal reports.

The NGA represents more than 1,200 companies, all of which will be able to decide to opt in or out of the agreement, though analysts predict that the number of merchants that will choose to opt out will not be significant enough to stall the deal.

Retailers began filing lawsuits against Visa and MasterCard in 2005, alleging that the card companies colluded to establish high interchange fees. Under the settlement announced July 13, Visa, MasterCard and several card-issuing banks, including Bank of America and JPMorgan, agreed to pay more than $6 billion to retailers. Visa and MasterCard also agreed to reduce interchange fees by 10 basis points for eight months and allow merchants to charge consumers a “checkout fee” for paying with plastic.

The NGA said that this ability to now charge a checkout fee is accompanied by “burdensome restrictions,” making it “unlikely that many of NGA’s members will be able to make this provision workable,” according to The Wall Street Journal.

Retailers will be required to disclose the new fee at the point of entry, point of sale and on the sales receipt, and merchants would be prohibited from charging Visa and MasterCard users more than those consumers who use American Express or Discover.

If 25 percent of the merchants of Visa and MasterCard’s credit sales volume decide to opt out of the settlement, the card processors can nullify the deal.

Keefe, Bruyette & Woods, which performed an analysis of sales for the top 100 American retailers, said that is unlikely to occur.

“Even in the worst-case scenario where all of the remaining top 85 retailers…opt out of a settlement, their representation of volume would amount to roughly 20 [percent],” KBW said, The Wall Street Journal reports. “Outside of a coordinated and large retailers movement to opt out of settlement, we believe the risks to a settlement are relatively low.”

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