New Challenge to Swipe-Fee Decision

Published in CSP Daily News

Decision “preserves the anti-competitive structure of the payments market”: RILA

ARLINGTON, Va. -- The Retail Litigation Center (RLC), which serves as the litigation arm of the Retail Industry Leaders Association (RILA), filed a brief amicus curiae with the U.S. Court of Appeals for the District of Columbia Circuit urging the court to affirm a district court decision to invalidate the Durbin Amendment debit-card swipe-fee rule promulgated by the Board of Governors of the Federal Reserve.

Retailers argue that the board’s swipe-fee rule preserves the anti-competitive structure of the payments market in clear contravention of the Durbin Amendment itself. The brief highlights the failure of the board’s rule to address the language, spirit and purpose of the Durbin Amendment and asks the D.C. Circuit to deny the appeal in the interest of consumers and the retail industry, which face higher costs and have little redress under the current Visa and Mastercard duopoly.

The challengers in the case, NACS, et al., vs. Board of Governors of the Federal Reserve System, raised concerns about the board’s failure to issue a rule that creates the competition that the Durbin Amendment envisioned to lower interchange fees in the debit-card market that the Durbin Amendment envisioned. The RLC brief analyzes the state of the market and the workings of the debit-card transaction system to demonstrate how the rule failed to follow the intent of the statute and to create competition.

“The rule developed by the board fails to follow the plain language of the statute and, therefore, fails to create competition,” said Deborah White, RLC president. “The flawed interpretation by the board counting the PIN and Signature networks as separate debit networks, although controlled by the same dominant companies and limited in their application by market forces, does nothing for consumers or merchants. The court should affirm the district court decision and instruct the board to develop a rule that will restore competition in keeping with it Durbin Amendment.”

RILA and the RLC have long maintained that the payments market is broken and that the fundamental lack of transparency and competition hurts merchants and consumers alike. RILA led the effort to enact the Durbin Amendment debit-card swipe fee reforms and will continue to pursue legislative and regulatory efforts—including on credit-card swipe fees—to reduce the burden placed on merchants by the Visa/Mastercard duopoly and the big banks, and bring competition to the broken electronic payments market.

From the brief filed with the U.S. Court of Appeals:

“In a thorough and well-reasoned opinion, the district court rejected the board’s misguided approach. The district court correctly held that the board’s rule violated the plain language of the statute, its spirit, and its purpose.

“The rule’s perpetuation of the current duopolistic state of the market will do nothing to reduce fees or encourage competition. To the contrary, it will only solidify Visa and MasterCard’s stranglehold on the market for debit-card acceptance, a result antithetical to the goal of the Durbin Amendment.

“Not only did the board choose the option that creates virtually no competition, it declined to adopt other available approaches that would have promoted competition.”

The complete brief, which can be found here, was written by Emery Celli Brinckerhoff & Abady, LLP attorneys Andrew G. Celli, Jr. and Ilann M. Maazel.

RILA is the trade association of the world’s largest and most innovative retail companies. Its members include more than 200 retailers, product manufacturers and service suppliers.