Retail trade group to opt out of $7.2 billion credit card-fee pact

American Express and MasterCard credit cards are shown in Washington June 25, 2008.

Credit: Reuters/Jim Bourg

By Jessica Dye

NEW YORK | Wed Apr 10, 2013 9:15pm EDT

NEW YORK (Reuters) – A major retail trade association said Wednesday it will reject a proposed $ 7.2 billion settlement with credit-card giants Visa Inc (V.N) and Mastercard Inc (MA.N) over card fees, calling it a “bad deal” for nearly 8 million U.S. merchants.

The Retail Industry Leaders Association, or RILA, said it intends to “make a statement” by opting out of the potentially historic settlement just as lead lawyers for the plaintiffs and credit-card companies are preparing to file papers seeking final approval from a federal judge in Brooklyn, N.Y.

RILA represents some of the largest U.S. retailers, including Walmart Stores Inc (WMT.N), Target Corp (TGT.N) and Home Depot Inc, all of which have previously expressed dissatisfaction with the proposed settlement.

The move could prompt a new round of criticism of the deal from large U.S. retailers and possibly more opt-outs. The credit card companies believe they have a judge’s backing in the settlement, but a high number of opt-outs could imperil the hard-fought pact.

The proposed settlement, announced last year, would resolve an eight-year old lawsuit on behalf of U.S. merchants accusing Visa and Mastercard of artificially raising interchange, or swipe, fees, which are paid to process credit-card transactions. The settlement includes a $ 6.05 billion payment and $ 1.2 billion in temporary swipe-fee reductions, as well as changes to Visa and Mastercard rules to allow merchants to charge customers extra for using certain cards.

U.S. District Judge John Gleeson has already given preliminary approval to the proposal, potentially the largest private antitrust settlement in U.S. history. Nearly 8 million stores, restaurants and other merchants that accept credit cards have been given until May 28 to opt out or object to the deal.

If merchants opt out, they will not be eligible to receive a portion of the monetary damages. But they note that they will be bound by parts of the settlement that would prohibit them from suing Visa and Mastercard over similar interchange issues in the future, if the settlement is approved.

RILA general counsel Deborah White said that the group is opting out of the settlement on its own behalf, and that each of its members will have to decide individually whether to object, opt out, or stay in the litigation.

“We do have the support from a large majority of our membership for opting out and objecting, and we want to make sure we’re shedding light on what the true ramifications are for the proposed settlement,” White said in an interview.

The group believes that the litigation releases in the settlement will force merchants to forego future legal claims against Visa and Mastercard in exchange for “paltry” monetary relief over years of harm from swipe fees, which have cost merchants billions of dollars, White said.

RILA is among the first major trade groups to come out swinging against the deal, which drew a flurry of opposition at the preliminary approval stage last year. The National Grocers Association said in February that it would opt out, and urged its members to do the same.

Visa, Mastercard and a lawyer for lead plaintiffs supporting the settlement did not immediately respond to requests for comment Wednesday evening.

Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents the payment card industry, said she remained “highly confident that this (settlement) will be approved, and that the interchange fee battle will finally come to an end.”

A hearing on final approval is set for September.

(Reporting by Jessica Dye; Editing by Andrew Hay)

(This story corrects paragraph seven to say litigation releases are binding even for merchants who opt out of the settlement)

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Reuters: Business News

Retail trade group to opt out of $7.2 billion credit card-fee pact

German Economist Proposes "One Time" Cyprus-Like 15% Wealth Tax on Italians; Italy Proposes Easing Stability Pact; Is Italy the Next Cyprus?

Once trust is lost it is very slow to recover. For now, much of Europe is acting as if it believes Cyprus is a “one time” thing? But isn’t that what we heard about Greece? Who is next? Italy?

In an article on Handelsblatt the chief economist of Commerzbank says: Italy should bring a unique wealth tax.

It is a myth to talk of crisis-strapped states. Even the German Institute for Economic Research (DIW) and the chief economist of Commerzbank, Joerg Kraemer says the numbers suggest a different view.

Kramer relies on surveys of the European Central Bank. Net financial assets of the Italians are 173 percent of gross domestic product (GDP). This is significantly more than the net financial assets of the Germans, which corresponds to 124 percent of GDP, said Kramer for Handelsblatt Online.

“So it would make sense, in Italy for a one-time property tax levy,” suggested the Bank economist. “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product.”

Reader Bernd suggests Kraemer means a net tax on all assets not just financial ones, but either way the idea is preposterous. Banks always want bailouts to fall on the backs of private citizens not on banks.

Italy’s Companies Face Slow ‘Death’ as Credit Crunch Deepens

While pondering the above confiscation threat, Ambrose Evans-Pritchard the Telegraph reports Italy’s Companies Face Slow ‘Death’ as Credit Crunch Deepens.

Confindustria, the business federation, said 29 percent of Italian firms cannot meet “operational expenses” and are starved of liquidity. A “third phase of the credit crunch” is underway that matches the shocks in 2008-2009 and again in 2011.

In a research report the group said the economy was caught in a “vicious circle” where banks are too frightened to lend, driving more companies over the edge. A thousand are going bankrupt every day.

Franco Bernabè, the head of Telecom Italia, echoed the warnings, lamenting that firms are literally “dying from lack of liquidity”. He called on the Bank of Italy to take bolder action to head off disaster. “The Italian economy is being suffocated. The country must intervene rapidly to reinject funds into the economy”, he said.

Late payments have become a chronic problem across the board in Italy, with 47,000 official complaints last year. The research group CGIA di Mestre said half of small companies cannot pay their staff on time.

Loans To Businesses and Households Plunge

Backing up what Ambrose Evans-Pritchard said with hard data, the Italian site Il Sole 24 Ore reports New Fall in Bank Lending to Households and Businesses.

Loans to businesses and non-financial families continue to face strong decrease. In February, according to the estimates in the monthly report of ABI were down 2.84% trend (-2.79% in January).

In 2012 there has been a strong leap in non-payments, up 8.8% compared to 2011. Compared to 2007, the last year before the crisis, the increase is 45 percent.

Total gross non-performing loans amounted to 6.4% in January 2013, up from 5.4% a year earlier (+17.5% YoY). With regard to small businesses, NPLs has more than doubled since 2008, rising from 3% to 7.4%. NPLs in family businesses rose from 7% to almost 12 percent. Gross NPLs totaled 126.1 billion in January.

In the construction sector companies the number of non-payments rose by 10,700 up 80% since 2007.

Italy Proposes Easing Stability Pact

In the “Germany is Not Going to Like This” category, Il Sole 24 Ore reports Italy Proposes Easing Stability Pact while lowering growth estimates and increasing deficits.

The government intends “loosen the constraints of the stability pact to allow the use of further resources.”

Italy finance minister Vittorio Grilli says the proposal is to “increase our potential debt of 20 billion per year in 2013 and 2014, to create the cash on hand to pay for” expenses.

In this context, the government cuts economic growth forecasts: GDP in 2013 will drop by 1.3% from a previous estimate of -0.2%. GDP is expected to drop by 1.7% in 2014.

The 2013 deficit was revised up to 2.9% from 1.8%. The minister stressed that the increase of debt of 40 billion, to pay the debts of the government, is the “ceiling.”

Reflections on “The Ceiling”

Note the euphemism “create cash on hand to pay for expenses” by going another 40 billion in debt. Also note the increase in debt of 40 billion euros is “the ceiling”.

Care to bet? If so, care to bet that GDP estimates will not be lowered again?

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

German Economist Proposes "One Time" Cyprus-Like 15% Wealth Tax on Italians; Italy Proposes Easing Stability Pact; Is Italy the Next Cyprus?