WASHINGTON — A federal judge has struck down a rule setting a cap on the fees that banks can charge merchants for handling debit card purchases, saying the Federal Reserve didn’t have the authority to set the limit in 2011.
The ruling by U.S. District Court Judge Richard Leon Wednesday handed a victory to a coalition of retail groups.

They had sued the Fed over its setting the cap at an average of about 24 cents per debit-card transaction. The previously unregulated “swipe” fee averaged 44 cents. The Fed initially proposed a 12-cent cap, and the retailers had argued that the Fed buckled under pressure from bank lobbyists when it set the cap higher.

FMI Applauds Swipe Fee Ruling

In response to the ruling in the case of NACS v. Board of Governors of the Federal Reserve System, The Food Marketing Institute released the following statement:

“We are delighted that the court agreed that the Federal Reserve Board exceeded its authority under the law in nearly doubling the interchange fees banks are allowed to charge merchants for debit transactions. This ruling marks a major a victory for supermarket shoppers and will ultimately result in lower costs at the checkout line by billions.”

The Fed now must craft a new rule. The current one will remain in effect in the meantime.

A Fed spokesman said there was no immediate comment on the ruling.

The cap is the first-ever limit on debit card fees. Before it took effect in October 2011, banks had negotiated such fees with merchants. A big chain like Starbucks would likely get a better rate than a local coffee shop because it handles more customers. The fees were typically based on a percentage of the purchase price.

The Fed rule was called for by the 2010 financial overhaul law, which was enacted in response to the 2008 crisis. But Leon said in his ruling that the Fed disregarded Congress’s intent in passing the law by “inappropriately inflating all debit-card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit-card transaction.”

The retailers’ lawsuit maintained that the cap is an “unreasonable interpretation” that exceeds the authority given to the Fed by the 2010 law. It also asserted that the Fed wrongly interpreted a provision of the law that requires that merchants have a choice of which bank network handles their transactions.

The retailers complained that the Fed had deviated from the law’s intent by allowing additional costs to be factored into setting the level of the cap, costs which exceeded reasonable expenses incurred by banks in debit transactions.

Sen. Richard Durbin, D-Ill., the author of the provision of the 2010 law mandating a cap on swipe fees, called Leon’s ruling a “victory for consumers and small business around the country (that) will lead to lower interchange rates for billions of debit-card transactions each year.”

Durbin, who is the assistant majority leader in the Senate, had filed a legal brief supporting the retail groups’ suit in the case.

Reprinted from The Washington Post (7/31/2013)

An appeals court on Tuesday unanimously upheld a decision striking down New York City’s restrictions on the sale of large, sugary drinks, dealing a serious blow to Mayor Michael R. Bloomberg’s hopes of reviving the rule before his term runs out.

The court, the First Department of the Appellate Division of State Supreme Court in Manhattan, concurred with a lower court’s ruling that the city’s Board of Health, appointed by the mayor, overstepped its bounds as a nonlegislative body by approving the rule. The justices also said that the various exceptions and carve-outs in the rule demonstrated that the board was concerned with matters beyond its core mission to improve public health.

“Such mechanism necessarily looks beyond health concerns, in that it manipulates choices to try to change consumer norms,” Justice Dianne T. Renwick wrote. The board, the decision stated, “violated the state principle of separation of powers.”

Seeking to reduce runaway obesity rates, the rule was announced by Mr. Bloomberg last May and approved by the health panel in September. The measure would have prohibited the sale of many sweetened drinks in containers larger than 16 ounces, but the appeals court wrote that the rule was laden with confusing loopholes and exemptions.

Only establishments that received inspection grades from the city’s health department, including movie theaters and stadium concession stands, would have been subject to the ban. Those with self-service drink fountains, like most fast-food restaurants, would be prohibited from stocking cups larger than 16 ounces. Meanwhile, vending machines and some newsstands would be exempt, along with convenience stores. The signature 64-ounce Big Gulp at 7-Eleven would escape the soda ban unscathed.

The rule also would not have affected fruit juices, dairy-based beverages like milkshakes and mixed coffee drinks, no-calorie diet sodas or alcoholic beverages.

Opposition to the limitations has been vocal, as city business owners and consumers deemed the rule and its loopholes unworkable and unenforceable. These concerns were voiced by Justice Milton A. Tingling of State Supreme Court in March, when he struck down the soda ban a day before it was scheduled to go into effect, calling the restrictions “arbitrary and capricious” and an overreach of the Board of Health’s power. Justice Tingling said the City Council would have to approve such a measure.

The argument against the ban has raised intriguing questions about the power held by the health panel, which has traditionally enjoyed a broad purview; the board has placed restrictions on lead paint and prohibited trans fats in food at city restaurants. The Bloomberg administration has argued that the city’s unchecked obesity epidemic should be similarly categorized as a broad and serious public health matter.

The ruling on Tuesday could mean the end of a signature effort of the Bloomberg administration and a centerpiece of the mayor’s third-term public health agenda, and leaves little time for the city to bring the plan back to life given Mr. Bloomberg’s waning time in office.

The city plans to appeal to the Court of Appeals, the highest appellate court in New York State. Officials in the city’s legal department could try to have the appeal argued — and, potentially, decided — before the end of the year, when Mr. Bloomberg’s term ends. But such an expedited appeal would be dependent on a number of procedural factors breaking in the city’s favor. Lawyers for the soda industry may also try to drag out any proceedings so the case would spill into the administration of a new mayor, and none of the current candidates for City Hall have expressed significant interest in continuing to fight for the restrictions.

In a statement on Tuesday, Mr. Bloomberg called the ruling “a temporary setback” and referred to “the irreversible health impacts of obesity and Type 2 diabetes – both of which are disproportionately linked to sugary drink consumption.” He said his office would “continue the fight against the obesity epidemic” and appeal the case.

Critics of the ban, however, do not seem to think that such an appeal would stand a chance. “With this ruling behind us,” said Christopher Gindlesperger, a spokesman for the American Beverage Association, “we look forward to collaborating with city leaders on solutions that will have a meaningful and lasting impact on the people of New York City.”

Michael M. Grynbaum contributed reporting.

Reprinted from The New York Times (7/30/2013)

The California Conference for Equality and Justice (CCEJ) is eternally grateful to the Food and Beverage industry for its support and friendship over the past 39 years.

CCEJ is a human relations organization dedicated to eliminating bias, bigotry and racism in America. CCEJ breaks down the distance between people by promoting understanding and respect among all races, religions and cultures through education, conflict resolution and advocacy.

CCEJ’s flagship program is our Building Bridges Human Relations Camps. Each year CCEJ takes more than 500 high school students to the mountains for a three-day residential camp program.

The Building Bridges campers engage in open and honest dialogue about human relations issues related to race and culture and examine how these issues impact their schools. These diverse groups of students develop skills in team-building, conflict resolution and effective communication.

Each camp culminates with students making a personal, sustainable commitment to reduce violence and promote an inclusive community at school in their neighborhoods. Professional, external evaluation shows that Building Bridges increases students self-esteem, reduces prejudice and encourages students to be advocates for positive human relations in their schools. Put simply, Building Bridges opens minds.

For the last 39 years CCEJ has been privileged to receive the support of the Food and Beverage industry by hosting a Humanitarian Awards Dinner. Each year, CCEJ recognizes three outstanding humanitarians from the industry for their spirit of philanthropy, good will and contribution to the community.

Each year the Food and Beverage Industries’ Humanitarian Awards Dinner raises funds to support CCEJ’s critical work, including raising enough funds to support a full Building Bridges Camp. The cost to take 135 high school students to camp is $40, 000

This year we honor three deserving individuals:

• Kevin Davis, President & CEO, Bristol Farms;
• Walter Cybulski, Director or Retail-Grocery, PepsiCo; and
• Willie Crocker, Senior Portfolio Development Manager, BBU/Earthgrains Baking Company.

The dinner is Thursday, Sept. 12, 2013, at the Hilton-Anaheim and will be chaired by former Humanitarian Award recipient Jim Lee, who recently retired from Stater Bros. Markets.

Please support CCEJ and help honor these humanitarians by attending, donating in their honor, or supplying an auction item. For further information, please contact Katherine McIlquham at (562) 435-8184 or visit www.cacej.org.

The California Independent System Operator (ISO) has issued a Flex Alert in Northern California for July 1, 2 due to high temperatures.

A Flex Alert is an urgent call to Californians to immediately conserve electricity and to shift demand to off-peak hours (after 6 p.m.). The Flex Alert campaign is an educational and emergency alert program that informs consumers about how and when to conserve electricity. The public awareness campaign is critical to achieving high levels of conservation during heat waves and other challenging grid conditions such as wildfires or when major power plant or power lines are unavailable

View more information on today’s Flex Alert, including real-time electricity usage and programs designed to provide businesses with incentives to reduce power.