Digital Transactions Authoritative, insightful and timely information for payments professionals
A trade group representing card networks and issuers is taking aim at restaurant surcharges and price increases by large grocers as part of its efforts to defeat the Credit Card Competition Act.
The Electronic Payments Coalition earlier this spring fired its first salvo in its new campaign against the CCCA. In a press release, the EPC highlighted restaurant surcharges, including a 5% dine-in fee, a 4% hospitality charge, and a 4% employee-benefits fee. The EPC argues the surcharges, which it terms “sneaky restaurant fees,” run counter to restaurants’ claims that they need relief from credit card swipe fees.
Instead of focusing on credit card mandates, Congress should pass a “Truth in Dining Act” to let “Americans on a budget know exactly what they are going to pay before the bill shows up,” the EPC said in a press release.
But dining establishments aren’t the EPC’s only target. The lobbying group called out large grocery stores for raising prices as consumers grapple with inflation. It cited a recent report from the Federal Trade Commission questioning whether price increases were necessary “and if the continued higher prices were all about increasing profits.”
The group charged that large grocers “and their lobbyists are trying to blame credit card companies for these higher prices as an excuse to push new mandates on American’s credit cards.”
The credit card bill would require financial institutions with $100 billion or more in assets to enable at least one network other than Visa or Mastercard for transaction processing. Proponents see the bill as a bid to reduce merchants’ card-acceptances costs by increasing network competition.
The EPC’s latest tactic, the group says, is intended to educate lawmakers that credit card swipe fees are not hindering merchants’ profits, while price increases and surcharges are padding merchants’ bottom lines.
“Part of EPC’s role is to highlight the immense value credit card payments offer both consumers and businesses, in addition to our work educating lawmakers on the negative impact of the Durbin-Marshall mandates,” an EPC spokesperson says by email. “Durbin-Marshall” is a reference to Richard Durbin, D-Ill., and Roger Marshall, R-Kan., the two Senators who introduced the CCCA in 2022.
“Corporate mega-stores and their lobbyists are trying to blame credit card companies for these higher prices as an excuse to push new mandates on American’s credit cards,” the spokesperson adds.
Merchant trade groups counter that the EPC’s new line of attack is a tacit acknowledgment that its previous efforts to derail legislative support for the CCCA haven’t worked.
“It’s hard not to chuckle when banks say restaurants make too much money, when restaurants are one of the lowest-margin businesses,” says Sean Kennedy, executive vice president for public affairs at the National Restaurant Association. “Restaurants compete on price, and every restaurant I talk to says swipe fees are one of their biggest costs and show no signs of slowing down.”
Small restaurants typically run on a 3%-to-5% pre-tax margin. More recently, however, their margin is closer to 1% due to rising costs, the NRA says.
Kennedy says it is “disingenuous” for large banks to claim restaurants won’t pass along any CCCA cost savings to consumers. They will need to do so to remain price-competitive, he argues.
Kennedy adds he does not see restaurant surcharging as a long-term trend, since the tactic would only drive consumers who don’t like the practice into competing restaurants that don’t surcharge. As that happens, restaurants that surcharge will have to reevaluate levying the fee, he says.
FMI-The Food Industry Association (formerly The Food Marketing Institute), which represents large grocers, says its members also need relief from swipe fees as they operate on margins between 1% and 3%. “When you account for swipe fees on credit card transactions averaging 2-4% per transaction, it quickly becomes clear these fees have a significant and negative impact on grocers’ bottom lines, as we chase pennies while the largest banks and credit cards pocket billions each year in swipe fees,” Jennifer Hatcher, the FMI’s chief public policy officer and senior vice president, government and member relations, says by email.
Adds Doug Kantor, an MPC executive committee member and general counsel for the National Association of Convenience Stores: “The EPC can cast aspersions all it wants on merchants, but all it shows is desperation on their part.”
