Merchants and credit card companies are going to war at the cash register.
Retailers, emboldened by the Competition Bureau's legal action against Visa Canada Corp. and MasterCard International Inc., are stepping up their battle against rising credit card fees charged to merchants.
They want consumers to think twice before paying with plastic and they're urging the federal government to take more action to rein in those fees, which retailers pay to process credit card transactions.
The Canadian Federation of Independent Business said Thursday it will launch a consumer campaign in early 2011 to encourage shoppers to use cash or debit, which cost retailers far less in fees.
The CFIB will arm its more than 100,000 members with bold signs, designed to be placed at cash registers across the country, that "promote the benefits" of using those other forms of payment.
"Most Canadians are unaware that small businesses pay huge fees to the banks and credit card companies to process credit card transactions," says one prototype sign. "Paying with cash or by Interac helps independent firms keep prices down for us all."
The tactic is designed to spur consumer awareness about rising merchant fees, which became a hot-button issue again this week after the Competition Bureau urged its quasi-judicial body to strike down certain "anti-competitive" practices used by Visa and MasterCard.
The bureau's most controversial recommendation is to allow retailers to add a surcharge to purchases made on "premium" cards, which carry higher merchant fees.
Over the coming weeks, the federation will also lobby Finance Minister Jim Flaherty to strengthen the voluntary code of conduct for the payments industry.
In particular, the CFIB wants Mr. Flaherty to permit retailers to levy surcharges and allow them to refuse higher-cost premium credit cards.
"Merchants are going to be extremely loath to ever use those powers … But the mere fact that merchants would have the power to do that, we think would cause a big change in behaviour on the part of Visa and MasterCard," said Dan Kelly, the federation's senior vice-president of legislative affairs.
"We think this would cause them to rethink their premium-card strategy because they would be absolutely petrified that merchants would have the ability to turn down cards or surcharge."
Visa and MasterCard, which control more than 90 per cent of the Canadian credit card market, plan to fight the bureau. They also argue merchants should be upfront with consumers about all their existing options to reduce merchant fees. For instance, retailers can offer a discount to customers who pay with cash, cheque or debit.
"We've always allowed merchants to discount for certain forms of payment," said Don Lebeuf, vice-president of customer delivery at MasterCard Canada.
The CFIB is also seeking other amendments to the code, including a better process for dispute resolution with card companies, banks and payment processors.
Specifically, it wants the Department of Finance to establish a new unit to oversee the industry, collect data and resolve disputes. Nonetheless, the federation opposes formal regulation.
That puts it at odds with the Retail Council of Canada, whose members represent about 80 per cent of all retail sales. President Diane Brisebois said she plans to push Mr. Flaherty for binding regulation to tackle rising merchant fees.
"It is hurting the economy. It is hurting merchants and their customers - let's regulate," Ms. Brisebois said. "And until that time, the merchants should be certainly be promoting Interac debit, but promoting cash is irresponsible."
There are costs associating with handling cash for businesses, along with security risks for both retailers and consumers, Ms. Brisebois said. The council also opposes charging consumers extra fees.
"Our Code of Conduct has been widely applauded by consumer and merchant groups alike since we announced it earlier this year, and all major industry participants signed on to it voluntarily," said Annette Robertson, Mr. Flaherty's press secretary. "We are committed to the Code's content."
A survey by the Consumers' Association of Canada last year found that 90 per cent of Canadians oppose permitting retailers to impose surcharges.
In other countries where surcharges are already allowed, such as the United Kingdom and Australia, retailers "have often turned the practice into a profit centre at the expense of consumers," Visa said.
WHAT THE CFIB WANTS
Canada's leading small-business group plans a campaign in early 2011 to encourage shoppers to use cash or debit cards instead of credit cards, which cost retailers more in fees. The Canadian Federation of Independent Business also plans to ask Finance Minister Jim Flaherty to amend the industry's voluntary code of conduct to:
Allow retailers to apply a surcharge on credit card purchases
Allow retailers to refuse premium or higher-cost credit cards
Ensure that card companies visually differentiate between basic cards and premium cards
Ensure that retailers have a better process for dispute resolution with payment industry players