What Retailers Should Know About Latest U.S. Supreme Court Ruling

Store employee swiping a credit card at the register.

Recently the U.S. Supreme Court unanimously rejected a case brought before them regarding how retailers could pass on credit card fees to customers via higher prices or surcharges. Chainstorage.com reports, “In refusing to take up the case, the Supreme Court left in place last year’s ruling by the 2nd U.S. Circuit Court of Appeals that struck down the $7.25 billion antitrust settlement between Visa Inc. and MasterCard Inc. and a group of mostly smaller merchants.”   

At the heart of the original case are swipe fees imposed by credit and debit card issuers. Retailers argue that they should be allowed to pass on these fees to customers via surcharges or higher prices. In so doing, retailers would be able to communicate to customers from where the fees originate—credit card companies—which could pressure companies and banks to reconsider such fees.

Retailers contend their position is a First Amendment freedom of speech issue. Indeed, a key quote from the Supreme Court ruling was “In regulating the communication of prices rather than the prices themselves, Section 518 [the New York law] regulates speech." (Source: RILA) New York’s law, similar to laws in nine other states, imposes jail time and fines to retailers who charge customers using credit cards additional fees. (Source: RetailDive)  

How does the ruling impact the retail industry?

Deborah White, RILA Senior Executive Vice President and General Counsel, explains. “The Court's ruling affirms the right of retailers to communicate honestly with their customers about the true cost of credit cards. In so doing, the Court also recognized that it is the credit card companies, not the merchants, that are responsible for the higher prices in this context.”

The contention between credit card companies and banks, and the retail industry is not new. However, this recent Supreme Court ruling seems to give retailers a strong footing to affect change in fee regulation. One reason the retail industry rejected the original $7.25 billion antitrust settlement was because it would have opened the doors for credit card companies to continue to charge fees, expect retailers to pass them on to consumers, and prohibit future lawsuits over the fees.

Retailers do not want to have to add surcharges to cover credit card fees at all, but they feel it may be a necessary step toward their goal of minimizing how much banks and credit card companies can charge them in swipe fees. As NRF senior vice president and general counsel Mallory Duncan emphasizes, “That would be the opposite of our industry’s goal of bringing credit card swipe fees under control.” Duncan continues, seeming to hint at next steps for the retail industry, saying, “While merchants don’t want to surcharge, having the ability to do so would be an important negotiating tool in convincing the card industry to charge reasonable fees instead of continuing to drive up consumer prices through this skyrocketing hidden tax.”
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