It has been called the largest private antitrust settlement in history, but the tentative $7.3 
billion deal made last month between credit card companies and merchants may do little for Andy Charles, the owner of Haven’s Candies, which accepts credit cards at its three stores in the Portland, Me., area.
Although the settlement was announced with fanfare in July by the lawyers who negotiated it, the celebration may have been premature. Some merchants and retail advocates, including four organizations that are plaintiffs in the lawsuit, oppose the deal because, they say, it offers too little and will make it harder to take legal action against credit card companies in the future. The settlement is still subject to court approval and is unlikely to become official before the middle of next year.
“There’s nothing there,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation, a trade association that was not involved in the lawsuit. He called the cash and fee reductions a “drop in the bucket” compared with the amount banks had overcharged merchants to process credit cards.
The lawsuit was filed in 2005 on behalf of some seven million merchants who claimed that MasterCard and Visa had colluded, separately, with banks to eliminate competition and increase the price of their credit card transactions. Since then, the interchange fees, or so-called swipe fees, small merchants pay card networks have risen as the networks have plied cardholders with rewards, said David Robertson, publisher of the Nilson Report, which tracks the card industry.
In 2011, Visa and MasterCard accounted for 68 percent of credit card spending at merchants, according to the report, and the two companies’ grip on the market is likely to make retailers think twice before applying a surcharge. “Customers are very temperamental now,” said Nancy Alinovi, who owns two consignment shops called Adore Designer Resale Boutique in the Raleigh, N.C., area. “It’s much harder to get them to spend their money.”
Ms. Alinovi said she would never apply a surcharge. “However,” she added, “I love that we have the ability to do that, the freedom to do that.”
That freedom, however, is limited. Under the agreement, a merchant that added a surcharge to Visa or MasterCard transactions would also be required to add the surcharge to American Express transactions, if the merchant took American Express. (Half of those who accept Visa and MasterCard also take American Express, said David Darst, an analyst who covers the industry for Guggenheim Securities.)
But American Express has its own rule that says merchants must treat every form of electronic payment equally — and that means that to add the surcharge to American Express transactions, the merchant would have to add it to every other card it accepted, including debit cards. But both Visa and MasterCard prohibit surcharges on debit cards — Catch-22! — which effectively means merchants cannot add a surcharge to any transaction.
In reality, few merchants would impose a debit surcharge even if Visa and MasterCard permitted it. “Debit is the product that merchants want to encourage customers to use, so if you have a rule that says if you’re going to surcharge American Express you’re going to have to surcharge debit, you might as well have a rule that says no surcharge,” said Gary B. Friedman, a lawyer in New York who represents merchants in a separate class-action lawsuit against American Express.
Noah J. Hanft, MasterCard’s general counsel, said the company was not trying to use the rules set by other networks as a shield against competition. “We can’t fix the problems that other brands have with their rules,” he said. “We can only fix issues with our rules, but we have to ensure that there’s a competitive marketplace. We’re not going to enter into an agreement that’s not fair to our cardholders.” Visa officials declined to speak on the record.
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