Industry litigation is like a roundabout that we cannot exit. Rulings followed by appeals, followed by more of the same. Last month, U.S. District Judge Nicholas Garaufis ruled that American Express violated antitrust laws by prohibiting merchants from steering customers toward other payment methods, including other card brands. American Express vowed to appeal. I tried to visualize a merchant steering me for any purpose. Imagine…
Merchant: Ma’am, don’t buy television X. We don’t make much money on that one. We get better margins on television Y.
Me: But I like the features of television X and have been satisfied with this brand in the past.
Merchant: But your choice does not make me happy!
The lawsuit involving American Express is, of course, much more complicated and serious, but, overall, I do not think the industry gains much from litigation or government intervention. It seems attorneys are the only beneficiary. Instead of pouring millions of dollars (and time) into litigation, everyone could benefit from more education about card acceptance. Perhaps this would open the door to compromises by all parties or maybe I am just dreaming. As one business person remarked to me, there is a trend of people wanting to socialize the losses, but privatize the gains.
A Bloomberg article about the American Express case reported that, according to the government, card acceptance fees total about $50 billion a year in the United States. Okay, so this is one cost (among hundreds) of doing business; merchants do have some choices.
Maybe brick-and-mortar retailers should consider a surcharge on cash payments since this requires keeping a cash drawer, making change for customers, counting nightly, protecting from theft, and making deposits. Or how about a surcharge on check payments? Risks with consumer checks include insufficient funds and forgeries. In the business-to-business (B2B) realm, checks represent the highest process cost and increased days sales outstanding (DSO) for merchants.
What We Can Do
I know litigation will never end and my opinions will not influence giant corporations or politicians who have initiated, or plan to initiate, a lawsuit or government bill. However, I do hope that those who read this will ensure they are doing their part to maximize the value of card payments, not only for themselves, but also for their business partners in the card process.
As a merchant myself, I declared my love of card acceptance last month and offered advice to suppliers. We cannot forget that card payments have streamlined the store checkout process and created a booming eCommerce industry. In the B2B payments world, cards have also driven efficiency. Review the benefits of cards for end-users and suppliers, including some best practices for both. For worse or for better, we all need each other—buyers, suppliers, and providers of types—to make the card industry work.
Case Involving American Express
Reportedly, the government’s goal in this case (U.S. v. American Express Co., 1:10-cv-04496, U.S. District Court, Eastern District of New York) is to force American Express to eliminate restrictive rules.
American Express has said that merchants encouraging the use other cards would harm competition and not benefit customers. Some experts do not disagree, but say that most merchants will not steer customers even if allowed to do so. They will not take the time to train sales staff/cashiers on this issue. Nor do they want to slow the checkout process and potentially lose customers. Such thinking is supposed to make American Express feel better?
As PaymentsSource reported, Judge Garaufis designated March 21 as the date by which American Express must reach an agreement with Justice officials to avoid Garaufis imposing his own solution. We are waiting to see what happens now that the deadline has passed.
About the Author
Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…