2nd UPDATE:7-Eleven Store Owners Battle Credit Cards' Swipe Fees
September 30 2009 - 6:36PM
Dow Jones News
Dozens of 7-Eleven store owners, in a gambit to call attention
to credit cards' swipe fees, gathered in Washington Wednesday to
present Congress with 130 boxes containing nearly 1.7 million
signatures in favor of lowering the fees.
The franchisees joined 7-Eleven Chief Executive Joe DePinto and
House Democratic lawmakers on the U.S. Capitol grounds to argue the
petition drive showed consumers were also frustrated with the fees,
which have fueled a major spat between credit card companies and
retailers.
"They too want Congress to take action to regulate these unfair
fees, which are the highest in the industrialized world," DePinto
said in a statement.
Banks and the credit card network operators Visa Inc. (V) and
MasterCard Inc. (MA) dismissed the event as a stunt, saying
consumers were fooled into signing the petition.
"This petition is not what it appears to be. 7-Eleven used
deceptive language to trick their customers into signing something
they thought would save them money," a coalition of banks and card
network operators said in a statement.
Interchange fees, or swipe fees, are levied on retailers every
time a customer uses plastic to make a purchase. An important
source of revenue for many banks, the fees are loathed by
retailers. Set by Visa and MasterCard, they are paid to card
issuers via the merchant's bank.
Retailers claim the fees, which average about 1.75% of the
purchase price, are a hidden tax on consumers because merchants,
squeezed by razor-thin profit margins, are forced to pass them on
by raising prices. They also contend that Visa and MasterCard,
which have a combined 80% share of the credit-card industry, use
their market power to keep the fees high so they can expand their
network of member banks.
"We've sat down with these guys before. It's not a discussion.
It's not a fair negotiation," DePinto said Wednesday.
Visa, in a statement, said it has "always shown a willingness to
collaborate with retailers to develop solutions that help them
address bottom-line business objectives."
Banks contend the fees are a fair price for the increased sales
retailers generate when consumers enjoy the convenience of credit
cards. They also argue that legislation to limit the fees will only
harm consumers, citing a MasterCard-funded study that showed annual
credit card fees rose and rewards programs diminished when
Australia limited swipe fees.
"When merchants no longer pay for the cost and the value of
accepting cards, consumers end up footing the bill," MasterCard
Global Head of Public Policy Shawn Miles said.
Interchange fees paid by merchants grew to $48 billion in 2008
from $16 billion in 2001, according to the retailers. 7-Eleven says
its franchises paid $160 million in swipe fees last year. Navdeep
Bassi, a franchise owner from Costa Mesa, Calif., who appeared at
the rally, said he paid $28,000 - or more than a third of his
take-home pay - in fees last year.
Proponents have pushed legislation in both the House and the
Senate that aims to rein in the fees, but the proposals have failed
to gain traction, partly due to lawmakers' reluctance to take sides
in a business brawl.
Reps. Peter Welch, D-Vt., and Zoe Lofgren, D-Calif., co-sponsors
of legislation to crack down on the fees, attempted to cast the
issue in a populist light.
"The banks and the financial institutions are greedy and they
get away with it," Lofgren said, telling the crowd of 7-Eleven
franchisees they are victims of that greed.
7-Eleven began the petition drive in June. On Wednesday, dozens
of franchise owners began delivering 14,000 petition pads to more
than 30 congressional offices. The company claims they contain the
most signatures ever collected for a public policy issue on
record.
Retailers capitalized on the public's recent anger toward banks
and credit card issuers.
Collecting the signatures from his customers "was the easiest
thing we've done because they hate the credit card companies," said
Ali Ardabilizadeh, a 7-Eleven Political Action Committee member and
franchisee from San Clemente, Calif.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com