■ California declares 4-percent hike illegal, sparing local consumers

By Donna Beth Weilenman
Staff Reporter

Retailers in 40 states can tack on a 4-percent “checkout” fee when a shopper makes a purchase.

But that increase won’t happen in Benicia, because California is among the 10 states that have declared the fee illegal.

The hike in other states is the result of a settlement last July of an anti-trust claim started in 2005.

That’s when a group of merchants, including Kroger, Payless Shoes and Safeway, accused nearly a dozen credit card companies of conspiring to fix the fees stores pay with each credit card purchase.

The case was settled in the U.S. District Court for the Eastern District of New York.

One part of the agreement called for the credit card companies and banks to pay $6 billion to the complainants. Another part allowed the merchants to charge customers a fee to cover the cost of accepting credit cards.

The settlement doesn’t affect debit cards, cash or such electronic payment methods as PayPal, and California doesn’t permit those additional fees.

The National Retail Federation has petitioned against the surcharge, calling it a tax that threatens merchants’ goal of keeping prices low. Some consumer groups are worried that businesses in the 40 states that allow for the surcharge will pass on the extra cost to customers, even though they’ve built into their pricing the cost of doing business with credit card carriers.

On the other hand, several national chains, such as Target and Wal-Mart, announced during the weekend they refuse pass on the surcharge. “We’re not interested in surcharging customers in order to allow credit card companies to continue charging unfair fees,” said Randy Hargrove, Wal-Mart media spokesman.

Several announcements of the surcharge, which became effective Sunday, suggested it would have a greater impact on small, family-owned businesses, restaurants and boutiques — the types of retailers that are Benicia’s commerce specialty — rather than so-called “big box” stores.

Smaller companies might not be able to absorb the additional credit card business cost, some observers said.

Several Benicia companies expressed relief that there would be no credit card surcharge.

Rob Storelee, who said between 60 and 70 percent of his Rookies Sports Bar sales are paid with credit cards, worried about the way the current administration of the federal government “is trying to do anything and everything in its power to implement surcharges.”

He said he pays payroll and income tax, and medical, retail and personal property taxes. He was surprised to learn that at a certain income level, a mental health tax also is imposed. “I don’t mind paying taxes. I mind how those taxes are spent,” he said.

Storelee said he currently pays a 2-percent fee for credit card purchases at Rookies, 321 First St.

If California had gone along with the surcharge, he said, it could affect not only those using credit cards, but also those accepting them.

However, he knows many places no longer accept checks.

He recently made a large appliance purchase and discovered he couldn’t pay for the buy with a check.

“It’s great it isn’t happening here,” said Delando Pegan, an owner of the Rellik Tavern, 726 First St.

“Especially with the tax increases we’ve had, 4 percent could kill business.”

He explained that his type of business doesn’t collect taxes. “Our taxes are included. It comes out of profit,” he said.

Credit cards pay for about 70 percent of the purchases made at The Rellik, Pegan said. “We have $60,000 in credit card charges a month,” he said.

A company in one of the 40 affected states either would have to pass it on, or lose the 4-percent surcharge out of its income, which Pegan said impacts how much the company spends on advertising and other expenses.

Gene Pedrotti said his Ace Hardware store, 830 Southampton Road, in the Southampton Shopping Center, still takes checks, but said much of his business is done through credit card purchases.

“We don’t get a lot of checks, but I don’t have a problem with it,” he said.

“I’ve followed this closely, but I have received nothing to do with the settlement or the surcharges,” he said.

Pedrotti said his fees have been 2 percent.

“To me, it doesn’t make sense,” he said. “They were overcharging to begin with. This sounds like a huge increase.”

He said he could see the situation making check-writing popular again.

“Four percent is huge,” he said.

Though the Benicia Chamber of Commerce had no statement, Eric Hoglund, president of the Chamber’s Board of Directors and a member of the downtown merchants’ alliance that accomplished the formation of the Benicia Business Improvement District, said the matter may be discussed at the next Chamber meeting.

An agent at Estey Real Estate, Hoglund said his company doesn’t have a large credit card business. But he said he was interested in speaking with other merchants “who are deeply involved.”

He was interested in learning that California was among the states exempt from the surcharge issue.

“It’s good to be ahead of things,” he said.

“A lot of times people blame us in California, and it looks like this time, it’s going in the other direction.”

And Nancy Martinez, executive director of Benicia Main Street, said: “California is exempt — so shop locally!”