EMA Objects to Proposed Interchange Fee Settlement

The Energy Marketers of America urged the U.S. District Court for the Eastern District of New York to deny final approval of the proposed amended settlement in the Interchange Fee and Merchant Discount Antitrust Litigation. Thank you to all FUELIowa members who signed on to an industry led letter rejecting the proposed settlement. This marks another attempt by credit card issuers to resolve the case after courts rejected earlier settlement efforts.

EMA, representing thousands of fuel retailers and energy marketers across the United States, objected to the settlement because it would grant Visa, Mastercard, and card-issuing banks sweeping immunity from their anti-competitive practices while providing merchants with meager and ineffective relief.

In its objection filed with the Court, EMA argued that the proposed settlement is filled with loopholes and would not meaningfully change the anticompetitive problems with the current system.

The proposed settlement would direct Visa and Mastercard to reduce average credit card interchange rates by 0.1% for five years—only a small fraction of Visa’s and Mastercard’s current average rate of about 2.36%. After five years, Visa and Mastercard could raise interchange fees. Any interchange fee relief provided can also be cancelled out if Visa and Mastercard increase the network fees currently charged to merchants on each card transaction. Additional loopholes allow Visa and Mastercard to increase their network fees anytime “in response to market conditions.” The proposed settlement also fails to contain language preventing the credit card companies from creating new types of merchant fees.

The 1.25% cap on certain interchange fees is only temporary and can easily be manipulated by raising network and other non-interchange fees. Visa and Mastercard would also retain centralized control over interchange fees and restrictive acceptance rules. While the settlement would allow merchants to decline some rewards cards, the card companies could attach rewards—even small or token ones—to all their cards, rendering that right meaningless.

EMA further objected to rules that force merchants to accept Visa or Mastercard branded cards from every bank that issues such cards, even if the issuing bank provides substandard service or fraud prevention or imposes excessive or disproportionate fees.

For energy marketers, who operate on razor-thin margins, swipe fees remain one of the largest costs of doing business after payroll. A temporary, easily offset cut does not fix a system that has driven swipe fees past $111 billion a year. EMA also warned that approval of a weak settlement could be used to undercut real reform, including the Credit Card Competition Act.

EMA urged the Court to reject the proposed settlement.