Jul 19, 2007
ARLINGTON, VA — July 19, 2007 — Steven C. Smith, president and CEO of K-VA-T Food Stores, Inc., and chairman of the board of Food Marketing Institute (FMI), testified on interchange and other anti-competitive practices of credit card companies in a hearing today before the U.S. House of Representatives Judiciary Committee Antitrust Task Force.
"Conventional wisdom tells us that as volume grows prices should fall, but instead credit card companies have created much greater volume and raised fees and costs substantially. This is contrary to the basic concepts of the American free enterprise system," said Smith.
Visa and MasterCard control 80 percent of credit card purchase volume. Each company works with their member banks to collectively set the price of interchange fees. Because banks benefit from higher interchange fees, Visa and MasterCard compete to charge the highest rate.
"This hearing shows that a broken market exempt from normal competitive checks and balances hurts retailers and consumers. Visa’s and MasterCard’s current practice of forcing these exorbitant hidden fees on Americans is no longer defensible," said Tim Hammonds, FMI president and CEO.
Americans are paying the highest interchange fees in the world, which have risen 117 percent since 2001, reaping more than $36 billion for credit card companies. These fees are hidden charges on merchants every time a credit or debit card is used to pay for a purchase. Credit card company rules make it practically impossible for merchants to tell customers how much they are really paying.
Investigations by both Judiciary Committees in Congress, along with future hearings expected in this Congress, could very well lead to a push for legislation to provide significant relief to consumers and retailers.
The members of the House Antitrust Task Force are, in order of seniority by party:
K-VA-T Food Stores, Inc. is a retail supermarket chain operating 95 stores under the Food City banner in Kentucky, Virginia and Tennessee. The chain is a family-owned business started in 1955 and employs more than 11,000 associates. Sixteen percent of the company is owned by employees through the chain’s Employee Stock Ownership Plan.
"Conventional wisdom tells us that as volume grows prices should fall, but instead credit card companies have created much greater volume and raised fees and costs substantially. This is contrary to the basic concepts of the American free enterprise system," said Smith.
Visa and MasterCard control 80 percent of credit card purchase volume. Each company works with their member banks to collectively set the price of interchange fees. Because banks benefit from higher interchange fees, Visa and MasterCard compete to charge the highest rate.
"This hearing shows that a broken market exempt from normal competitive checks and balances hurts retailers and consumers. Visa’s and MasterCard’s current practice of forcing these exorbitant hidden fees on Americans is no longer defensible," said Tim Hammonds, FMI president and CEO.
Americans are paying the highest interchange fees in the world, which have risen 117 percent since 2001, reaping more than $36 billion for credit card companies. These fees are hidden charges on merchants every time a credit or debit card is used to pay for a purchase. Credit card company rules make it practically impossible for merchants to tell customers how much they are really paying.
Investigations by both Judiciary Committees in Congress, along with future hearings expected in this Congress, could very well lead to a push for legislation to provide significant relief to consumers and retailers.
The members of the House Antitrust Task Force are, in order of seniority by party:
| John Conyers (D-MI 14th District), Chair | Lamar Smith (R-TX 21st), Ranking Member |
| Howard Berman (D-CA 28th) | James Sensenbrenner, Jr. (R-WI 5th) |
| Rick Boucher (D-VA 9th) | Bob Goodlatte (R-VA 6th) |
| Zoe Lofgren (D-CA 16th) | Steve Chabot (R-OH 1st) |
| Sheila Jackson Lee (D-TX 18th) | Chris Cannon (R-UT 3rd) |
| Maxine Waters (D-CA 35th) | Ric Keller (R-FL 8th) |
| Stephen Cohen (D-TN 9th) | Darrell Issa (R-CA 49th) |
| Anthony Weiner (D-NY 9th) | Randy Forbes (R-VA 4th) |
| Artur Davis (D-AL 7th) | Steve King (R-IA 5th) |
| Debbie Wasserman Schultz (D-FL 20th) |
K-VA-T Food Stores, Inc. is a retail supermarket chain operating 95 stores under the Food City banner in Kentucky, Virginia and Tennessee. The chain is a family-owned business started in 1955 and employs more than 11,000 associates. Sixteen percent of the company is owned by employees through the chain’s Employee Stock Ownership Plan.
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