One of every five beauty purchases online is made via the Amazon marketplace, according to a new report.
The terms mean retailers can charge credit card users a fee for using them.
Payment card networks Visa Inc. and MasterCard Inc., along with a number of major credit card issuing banks such as Bank of America, Citibank and JPMorgan Chase, have agreed to settle a lawsuit filed by retailers that alleged the companies violated antitrust laws. At issue were the interchange, or swipe, fees credit card issuing banks charge retailers for each credit card transaction.
Merchants pay about $30 billion in credit card swipe fees annually, according to the National Retail Federation, a retail industry trade group that was not party to the suit. The settlement, valued at $7.25 billion according to Robins, Kaplan, Miller & Ciresi LLP, the firm representing the approximately 7 million retailer plaintiffs, includes a $6.05 billion cash payment and a temporary, eight-month reduction in interchange fees charged merchants participating in the suit, valued at $1.20 billion.
The settlement terms also allow merchants to negotiate interchange fees collectively. It is unclear whether the settlement will help web retailers negotiate for lower fees, as credit-card issuers consider online transactions riskier than store-based transactions and charge online retailers higher interchange rates accordingly.
However, settlement terms also change some of the rules Visa and MasterCard have required merchants to follow. Under the settlement, stores, if they so choose, will now be able to charge consumers more to pay with credit cards, and will have to post signs around the store informing consumers of the fees. This will raise consumers' awareness of the cost of using credit, and more retailers may encourage consumers to use alternate payment methods, such as debit, which have lower fees, says DenŽe Carrington, a senior analyst at Forrester Research Inc. "While the settlement doesn't help web retailers or any retailer directly renegotiate fees, it does give them new power to influence consumers' payment choices," she says.
"The reforms achieved by this case and in this settlement will help shift the competitive balance from one formerly dominated by the banks which controlled the card networks to the side of merchants and consumers," says K. Craig Wildfang, co-lead counsel for the plaintiffs in the case.