Money & Business

The Big Win: National Retail Federation's Swipe Fees Victory

By / Mar 1, 2013 Mallory Duncan, NRF’s senior vice president and general counsel. (Photo by Joshua Roberts)

From shoe leather on the Hill to crafting the right media message, the National Retail Federation’s Mallory Duncan helped put the spotlight on hidden credit- and debit-card fees. This is one association’s advocacy success story.

A simple piece of plastic can be rife with legal complications. In recent years, the National Retail Federation’s main advocacy effort has involved interchange fees—the small but not insubstantial charges that are assessed with every credit- and debit-card transaction. In the battle over those charges (more commonly known as swipe fees), Mallory Duncan, NRF’s senior vice president and general counsel, has a complicated job: Not only does he need to spread the word about the problem, but he also has to identify the appropriate legislative responses and find allies to bolster NRF’s advocacy goals.

The jury is still out regarding credit-card swipe fees, where the NRF is fighting a $7.25 billion settlement of an antitrust lawsuit, calling it, in a letter to congressional leaders, “a bad deal for merchants and their customers.” But the NRF scored a clear win in 2010 when the Dodd-Frank financial reform bill placed caps on fees for debit cards. That success, Duncan says, was a function of smart partnerships with similar organizations, effective communication both through mass media and direct conversation with legislators, and working with multiple levels of membership, from leaders of large chains to owners of the corner store.

“Because it’s a large issue, it’s not something that can be attacked with only a single arrow,” he says. “There are elements of this that are amenable to regulation. There are elements that are amenable to litigation, elements for legislation, elements that just require education of the public.”

You needn’t be on NRF’s side of the debate to appreciate what Duncan and NRF have accomplished. His story shows that a multipronged approach can be effective for any association, exemplifying how powerful each element of advocacy can be when it’s bolstered by an environment of cooperation.

New Alliances

Retailers represented by the NRF and other trade associations have been debating swipe fees with credit- and debit-card companies since at least the late 1990s. In 2005, a group of those associations formed the Merchant Payments Coalition, with Duncan as its chairman. The goal was to build public awareness around the fees—which the MPC says costs consumers $50 billion annually—through a show of strength in a variety of retail categories. (Its executive committee members are the National Association of Convenience Stores, the Food Marketing Institute, the National Grocers Association, and the National Restaurant Association, along with NRF.)

“The first thing was to realize that this was not a singular effort by any one trade association,” Duncan says. “All of us represent merchants, and merchants and their customers are being affected by this.”

One benefit of a wide coalition was it could play to each organization’s individual strengths: One might mobilize grassroots efforts, while others, like NRF, could take advantage of their strong communications capacity. The complexity of the legislative effort also demanded a wide range of expertise, and the coalition would need to identify legislators who could see the issue from its perspective. “Obviously, this affects commerce, so we talked to people in the Energy and Commerce Committee,” Duncan says. “This is an antitrust problem, so you talk with the folks in the Judiciary Committee.”

Naturally, a counterpart organization called the Electronic Payments Coalition, composed of banks and credit-card companies, was making its own case, arguing that swipe fees are relatively low in the United States and that merchants are capable of negotiating lower fees without legislation. The MPC’s efforts helped lead to an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which required the Federal Reserve to set a cap on debit-card interchange fees—dropping from a typical 43 cents to about 22 cents per transaction.

Duncan Roberts

One benefit of a wide coalition was it could play to each organization’s individual strengths: One might mobilize grassroots efforts, while others, like NRF, could take advantage of their strong communications capacity.

Media Mix

Partnerships and shoe leather on the Hill were just part of NRF’s approach. To make its message meaningful to legislators, it needed to show that the message was also meaningful to its member retailers and to those retailers’ customers.

One MPC partner, the National Association of Convenience Stores, helped organize member chains like 7-Eleven to have customers sign petitions protesting swipe fees. Ultimately, NACS claimed a total of 3.7 million signatures delivered to Congress. That’s a big, impressive number that looks good on a press release; it may even have caught the attention of a few members of Congress. But its most significant effect, Duncan says, was to generate support among the merchants. “It sends a message to the members that their time is not wasted,” he says.

Advertising can help too, Duncan says, but only to a limited degree. “At critical moments, advertising is important, but we had a very well-funded opponent, and you have to expect they will advertise,” he says.

Though the debit-card issue is settled for now, credit-card swipe fees remain “the big nut to be cracked.”

A better tactic for NRF was to establish the swipe-fee issue as an important consumer-news story and draw the media to it. So it was critical to establish the problem as one that hit consumers directly. A common talking point for the NRF is that swipe fees cost the average American more than $400 annually.

“When you find something that’s been hidden and you bring it to light, oftentimes the press is interested in saying, ‘This is something new we weren’t aware of before.’ That itself tends to generate interest,” Duncan says.

Though the debit-card issue is settled for now, Duncan says credit-card swipe fees remain “the big nut to be cracked.” (Last December, retailers asking for an expedited appeal of the $7.25 billion settlement were rebuffed by a federal appeals court; the appeal is still pending.) The upside for the organization is that the common cause has made the MPC a sturdier partnership than many are.

“This one was remarkably easy to come together because we were all suffering a common pain,” he says. “Anytime you have a marriage you have disagreements, and if you have five people in a marriage you have more disagreements. But this has been remarkably easy.”

Mark Athitakis

Mark Athitakis, a contributing editor for Associations Now, has written on nonprofits, the arts, and leadership for a variety of publications. He is a coauthor of The Dumbest Moments in Business History and hopes you never qualify for the sequel. More »

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