ALEXANDRIA, Va. -- The National Association of Convenience Stores welcomes today's Senate Judiciary Committee hearing, "Credit Card Interchange Rates: Antitrust Concerns?" which is scheduled to look at the potentially anticompetitive price-fixing practices of credit card companies.

NACS Executive Committee member and 2004-2005 Chairman Bill Douglass, CEO of Douglass Distributing Co. (Sherman, Texas), is among those testifying at the 9:30 a.m. hearing. Click here to access the live Webcast of today's hearing.

"Credit card interchange fees hurt my customers--who, in the end, pay for them--and hurt my business," Douglass said in his written testimony submitted to the committee. "The rise in these fees in recent years has made them the third highest operating cost for my business and for my industry as a whole. Only payroll and rent cost more than these fees."
 
Consumers pay a hidden fee on virtually every transaction they make, whether they use a credit card or not, costing tens of billions of dollars a year. This fee, called interchange, is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time a consumer uses a credit or debit card to pay for a purchase.

"Credit card interchange fees are unreasonably and inexplicably high," said NACS President and CEO Hank Armour. "We are pleased to see the Senate investigating the credit card fee price-fixing practices of Visa and MasterCard that take billions of dollars out of consumers' pockets every year. These practices hurt consumers and merchants alike and must stop."

In February, Armour testified before the House Energy and Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection that Visa and MasterCard "control a system that is fundamentally anti-competitive," adding that most consumers "don't even know that these fees exist because Visa and MasterCard wrote the rules that make it virtually impossible to tell consumers how much interchange fees cost them."

According to the Nilson Report, a business magazine that covers the credit card industry, Visa and MasterCard collected more than $26 billion last year in interchange fees--nearly double what they collected in credit card late fees.

Last year credit card fees cost the convenience store industry, which sells an estimated three-quarters of all fuel purchased in the United States, a staggering $5.3 billion, making the credit card companies silent profiteers as gas prices escalate. Card fees vary by type of card, size of merchant and other factors, but average close to 2 percent for credit card and signature debit transaction.

"I want to emphasize that the market by which interchange fees are set is broken, and something must be done to fix it," Douglass wrote. "The courts have said that Visa and MasterCard have market power, and I will tell you that the agreements among their members' banks to fix and charge the same fees are outrageous."

"In our view, the Congress does not yet have enough information about these fees to come up with a solution to this problem," Douglass explained. "We all need more investigation and information before we can prescribe the right solution. The bottom line is this: The situation is as bad as I can imagine right now. Just about anything you could do would be an improvement."

Complete coverage of Douglass' testimony and the Senate Judiciary Committee hearing will be available in Thursday's edition of the NACS Daily.

NACS is a founding member of the Merchants Payments Coalition (MPC), a group of 20 trade associations representing retailers, restaurants, supermarkets, drug stores, convenience stores, gas stations, on-line merchants and other businesses that accept debit and credit cards. The MPC is fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million locations with approximately 50 million employees.