Study shows $108 million in lower consumer prices, with the potential for more.
According to a new economic report released today by the Merchants Payments Coalition (MPC), debit card swipe fee reform has accomplished much of what Congress intended when it passed debit reform legislation in 2010 by pumping a significant infusion of savings and jobs into state economies across the country.
The report—The Costs and Benefits of Half a Loaf: The Economic Effects of Recent Regulation of Debit Card Interchange Fees—can be found at www.unfaircreditcardfees.com.
In Minnesota, the lower debit card swipe fee, which the Federal Reserve dropped from 48 cents per transaction to 24 cents, allowed Minnesota merchants to reduce costs, saving consumers nearly $108 million and spurred the creation of 690 new jobs in 2012.
The report also measured the potential impact on the U.S. economy had the Federal Reserve followed the language of the law. The Federal Reserve, for example, originally proposed a rate of at most 12 cents per debit swipe. In Minnesota alone, $51 million would have been generated in consumer savings along with an additional $23 million in merchant savings and this would have been sufficient enough to support an additional 328 jobs.
Had credit card swipe fees been reduced to 24 cents per transaction, Minnesota consumers would have saved an additional $283 million, merchants would have saved another $127 million, and 1,815 new jobs would have been created last year.
Storm relief, business to business taxes may be on the agenda
Governor Mark Dayton Minnesota Governor Mark Dayton is openly discussing bringing legislators back to the Capitol in September for special session to deal with storm relief. Business groups are pushing to add a repeal of recently enacted business to business services to that special session agenda.
Eighteen Minnesota counties have been approved for $17.8 million in federal aid for damage caused by June storms. Governor Dayton originally intended to call a special session to address only this issue, however the Governor has now indicated he is open to expanding the scope of the special session to include the repeal of the sales tax on farm equipment repair.
Business groups would like to see that list of possible appeals expanded to other business to business services including:
- Labor service charges for repair and maintenance of business equipment;
- Purchases of telecommunication equipment by telecom providers; and
- Storage and warehousing services of business-related goods.
Others would like to see the scope of a special session further expanded. Minnesota Representative Ryan Winkler, author of the minimum wage increase bill in the House, would like to use the special session to pass a minimum wage increase bill. Rep. Winkler has commented that he doesn't feel workers should not have to wait until 2014 for that increase.
Although the Governor has not indicated that the special session would include debate on minimum wage, conversations about the issue continue. The Select Committee on Living Wages, chaired by Rep. Winkler, is meeting in Brainerd on August 19 to discuss Minnesota's economy.
Appeal Supported By MnRA, Partners
In 2009, Walgreens, CVS, Rite Aid, Wal-Mart, Target, Sears, Kroger, and others were defendants in a class action lawsuit filed in Minnesota state court. Similar lawsuits were filed at the same time in Michigan and West Virginia. In the complaint, the plaintiffs alleged that a Minnesota statute, enacted in the late 1970s but never enforced, prohibits pharmacies from making any more profit on generic drugs than they would have made on the sale of the equivalent brand name drugs.
As a group, the pharmacy defendants successfully moved to dismiss three cases. A trial court found that there was no private right of action to enforce the statute at issue, and that the plaintiffs failed to state a claim under the Minnesota Consumer Fraud Act (MCFA). But more recently, in a 2-1 decision the intermediate court of appeals reversed most of the trial court's ruling, finding that the class action plaintiffs can proceed with a claim under the MCFA.
Last week the Minnesota Supreme Court agreed to hear an appeal of the intermediate court ruling.
The Minnesota Retailers Association (MnRA), at the direction of its Board, joined other interested partners in support of retail pharmacy defendants in June by petitioning to submit an amicus (or friend of the court) brief. The petition asked for a review of the appellate court's decision based on MnRA's belief that the MCFA should not be applied in this case, and that there is a potentially an impact on other areas of retail if a precedent of applying MCFA in this manner stands.
The Minnesota Supreme Court will hear the case and MnRA will join a group in submitting an amicus brief. That group includes the Retail Litigation Center, National Association of Chain Drug Stores, National Community Pharmacists Association, Independent Pharmacy Cooperative, Thrifty White Pharmacy, Minnesota Pharmacists Association, and Minnesota Chamber of Commerce.
Why Retailers Should Pay Attention
If successful, this lawsuit could result in damages equivalent to all of the "excess" profits each of the defendants made on the sale of generic drugs in the State going back to 2004, and would prevent the same defendants from making such "excess" profits going forward.
Although the current lawsuit is only against the larger chains, the plaintiffs' theory of the case applies equally to smaller chains and independent pharmacies. Also, there are similar statutes in roughly a dozen other states, and a win for plaintiffs in Minnesota likely will embolden the plaintiffs' bar to pursue similar litigation in some or all of those states.
In addition, MnRA is concerned that this case will establish precedent where the pricing of other non-pharmacy retail goods and services could be impacted by frivolous claims under the MCFA.