Update on Small Business Matters (SBM) Coalition and fairer credit card fees

ACTA is a participant in a national coalition known as the Small Business Matters (SBM) Coalition. The Small Business Matters Coalition was formed in 2014 to represent the interests of Canada’s small businesses. The coalition is comprised of over 20 trade associations that represent in excess of 100,000 small business sites operating in Canada. The main issue that brought this coalition of associations together was to address the need for fairer credit card fees for independent businesses. By combining our efforts, the coalition believes we can create a voice for our members who are deeply invested in the Canadian economy and the communities they serve. 

TORONTO, ON, August, 2016 – A recent release by both Visa and MasterCard of their long awaited ‘independent third party audits’ of their promised credit card merchant fee reductions under a voluntary agreement struck in April, 2014 with the Government of Canada, confirms what the Small Business Matters Coalition has been saying for the last year.   “We have stated all along that the promised voluntary reductions by the two big credit card companies to an overall average rate of 1.5% was not nearly meaningful enough to make any real difference in the plight of Canada’s small business” said Gary Sands, Chair of the Small Business Matters Coalition.  ”However, it is even more offensive that even that very modest target was not met.”   The Coalition has always questioned why an average merchant fee rate of 1.5% was deemed reasonable by the previous government and what it was based on, since even Nesbitt Burns dismissed what amounted to only a 10% reduction in fees as having “no positive financial impact” for merchants.  Further, in the context of caps on swipe fees of 0.3% and 0.5% being imposed by governments in jurisdictions like the EU and Australia as a means to support their small businesses, not achieving even a 1.5% average rate puts Canada’s small business merchants in the position of still paying amongst the highest credit card fees in the world, both before and after the promised ‘voluntary reductions’.

The Small Business Matters Coalition also believes that MasterCard’s audit results bear additional scrutiny.  Last year, Costco negotiated a near zero fee agreement with Visa in the United States.  There is a belief that Costco’s 2013 deal with MasterCard in Canada is based on the same factors and that a near 0% interchange fee was negotiated, which would be factored into MasterCard’s reported average 1.5% rate reductions in Canada.  “This would be another case of merchants on Main Street subsidizing companies on Bay Street”, says coalition Vice-Chair Alex Scholten. 

The coalition expects that very shortly, there will be an expansion of Wal-Mart Canada’s decision to refuse acceptance of Visa cards at more of their stores noting that this is an option that is simply not available to Canada’s small business owners.  “The fact that Wal-Mart (the largest retailer in the world) is refusing to accept Visa transactions because of the excessiveness of the fees speaks volumes on the severity of the issue in Canada. If a retailer that size and negotiating leverage cannot accept the excessiveness of these rates, one can only imagine what small business retailers in Canada must be facing.” says Sands.

A private members bill being brought forward in September by Liberal MP Linda LaPointe seeks to cap credit card merchant fees in a manner similar to what has been done in the EU and Australia.  “The review of such regulation would afford the government the opportunity to hear from Canada’s small business sector on what such measures should be and their need to put some of the $5 to $7 billion in fees paid annually by Canadian merchants to Visa and MasterCard back into the pockets of small business operators allowing them to remain price competitive, hire more people in their communities and to reinvest in their businesses.” concludes Scholten.