Visa and MasterCard recently agreed to a $7.2 billion settlement that would allow retailers to charge consumers a “checkout fee,” but some small business owners claim that these fees would only complicate a struggling retail market.
“This [settlement] was clearly negotiated by a bunch of attorneys who don’t understand how competitive the environment is for retailers,” Darin Kraetsch, the CEO and founder of the Georgia-based FlipFlop Shops, said, according to Inc. “We would never tell a customer that they have to pay us to give us money. It is such a slap in the face.”
As part of the settlement, Visa and MasterCard agreed to reduce interchange fees for eight months. Kraetsch said that this will likely result in credit card companies raising swipe fees after that period expires, adding that approximately 95 percent of purchases made at FlipFlop Shops are completed using credit cards.
“It is not in the best interest of the retailers to charge a surcharge because of a consumer outcry,” Patricia A. Sahm, the managing director of Auriemma Consulting Group, said, adding that surcharges would pressure consumers to use cash instead, though cash-only business could be costly for merchants, Inc. reports.
The accord ends a seven year dispute between card processors, banks and merchants. Experts, however, question whether the agreement will be effective.
“The merchants don’t think this is going far enough, it is not only about surcharging for them, it is also about the system and what they see as collusion and price fixing and the way the system works,” Madeline Aufseeser, a senior analyst at Aite Group, said, according to Inc.
Additionally, several U.S. states, including California, Florida, New York and Texas, prohibit credit card surcharges, a point that could create logistical discrepancies.
While some experts maintain that the settlement could limit future lawsuits against the card processors, others claim that the agreement could create incentive for card networks to lower interchange fees.
“We have seen this in data from other countries where surcharging is permitted…that it has a depressing effect on the level of interchange fees overall,” K. Craig Wildfang, a partner at Minneapolis-based Robins, Kaplan, Miller & Ciresi, said, according to Inc.