BTW News Briefs

Credit Card Companies Seek to Increase Swipe Fees

On October 8, the National Retail Federation warned Congress that credit card companies are in an "arms race" to increase the $48 billion in "swipe" fees paid by merchants and their customers each year, and urged passage of legislation that would put rules governing the fees under the jurisdiction of the Federal Trade Commission.

"There is an arms race to create cards with higher fees and more bells and whistles," NRF senior vice president and general counsel Mallory Duncan said. Duncan testified before the House Financial Services Committee during a hearing on H.R. 2382, the Credit Card Interchange Act of 2009, sponsored by Rep. Peter Welch (D-VT) and co-sponsored by Rep. Bill Shuster (R-PA). "The market checks that would normally exist to curb this escalation in fees are diminished because the card companies know that every merchant is required to take these expensive new cards or lose their ability to accept any cards."

Duncan explained that most consumers are unaware that every time they use a rewards card "they are driving up the price of everything they buy even higher. This particularly hurts less-privileged Americans who don't have rewards cards or can't get cards at all because Visa and MasterCard rules effectively require that everyone pay the credit card price even if they are paying with cash, check, debit card, or even food stamps."

Interchange is a fee averaging two percent that Visa and MasterCard banks charge merchants each time one of their credit cards is swiped to pay for a purchase. But Duncan explained to the committee that the rate can range from as low as about 1.5 percent for an ordinary card to three percent or more for "gold" and "platinum" cards that offer rewards like travel miles or concierge services. In recent years, card companies have created an escalating series of rewards cards -- each carrying more rewards but also higher fees -- and "upgraded" millions of consumers. The higher-fee cards can't be turned down by merchants because of Visa and MasterCard's "Honor All Cards" rule. The practice, along with marketing that has pushed the use of plastic and introduced cards into new areas like taxis, has helped triple interchange revenue from the $16 billion collected when NRF began tracking the fees in 2001 to the $48 billion collected last year.

Frankfurt Survey Finds No Publisher Consensus on E-Book Pricing

According to a survey by the Frankfurt Book Fair, most publishers think e-books should be less expensive than traditional books, but only 15 percent support Amazon.com's flat-rate of $9.99 on frontlist titles, The Bookseller recently reported.

The report indicates that there is no clear consensus among publishers on e-book pricing, the article noted, and added that the Frankfurt Book Fair is going so far as to say that that the publishing industry remains "completely divided about appropriate e-book pricing."

Eighty percent of the 840 respondents believe e-books should be less expensive than traditional books, while only four percent believe they should be more expensive. Frankfurt Book Fair organizers noted, "It is still completely unclear whether or not e-books will be used merely as a 'second book' for a quick glimpse, or whether portions will, in fact, ultimately be sold as mobile content for a price many times higher than the printed work."

One Percent Decline Forecasted in Holiday Sales

On October 6, the National Retail Federation released its 2009 holiday forecast, projecting holiday retail industry sales to decline one percent this year to $437.6 billion. While this number falls significantly below the 10-year average of 3.39 percent holiday season growth, the decline is not expected to be as dramatic as last year's 3.4 percent drop in holiday retail sales nor as severe as the 3.0 percent decline in annual retail industry sales expected for all of 2009. "As the global economy continues to recover from the worst economic crisis most retailers have ever seen, Americans will focus primarily on practical gifts and shop on a budget this holiday season," said NRF chief economist Rosalind Wells.

Though some hopeful signs of a recovery have begun to emerge, like better-than-expected sales in August and momentum in the stock market, continued consumer uncertainty over job security and housing values will take a toll on spending this holiday season. And, as retailers become even more promotional, certain popular holiday categories like apparel and electronics may experience deflation due to aggressive sales.

"The expectation of another challenging holiday season does not come as news to retailers, who have been experiencing a pullback in consumer spending for over a year," said NRF President and CEO Tracy Mullin. "To compensate, retailers' focus on the holiday season has been razor-sharp with companies cutting back as much as possible on operating costs in order to pass along aggressive savings and promotions to customers."