Don’t get caught by two-tier pricing

For as long as there have been bank-issued credit cards like VISA and MasterCard, merchants have paid a fee to authorize and collect their transactions through those payment systems — and, for almost as long, Historic City News has known of schemes by merchants to recover those costs.

Nearly fifteen years ago, the bankcard associations joined with American Express Travel Related Services Company to enjoin their merchants from adding a service charge to the price of their customer’s purchases — if they chose to pay by credit card. At one point, the associations threatened to drop and blacklist any merchant found guilty of the transgression through a centralized “terminated merchant file” — a system reserved for preventing fraudulent merchants from easily obtaining merchant accounts from other acquiring banks.

Where the practice was most prevalent was with retailers who operated on small margins of profit — like gasoline retailers who often make no more than 6 or 7 cents per gallon; regardless of the retail price and taxes charged to the customer.

Merchant fees vary, however, generally, a fee of two-percent or less of the total ticket is charged by the acquiring bank to the merchant making the sale. The merchant may also have to pay monthly “statement fees”, “transaction” or “authorization” fees, as well as the cost of their point-of-sale authorization terminal and adjustments for transaction made by certain types of business charge cards, or, where the card is not present or cannot be “swiped” through a magnetic card reader.

Many gasoline customers do not carry a “fee free” charge card from every gasoline retailer, nor do customers, especially those who travel out-of-town, want the hassle of trying to pay by check, so, retailers were stymied until they got the idea that instead of adding a “service charge” for credit, they would simply raise prices to assume credit as the method of payment, and offer a “discount” for paying by cash.

It worked, sort of, so long as everyone was advertising the “credit price” for gasoline.

Unless they were willing to run afoul of the bankcard associations, they had no choice than to post the “credit price” on their pumps, however, in order to appear more competitive in certain markets, gasoline retailers began a “two-tiered” pricing methodology; one for cash and one for credit, however, they would publish the lower, cash price on their roadside signs.

Isn’t that illegal? No, not necessarily, according to Dr. Matthew Curran, a manager with the Florida Division of Consumer Services.

If a complaint is received, and the investigator finds that the station was advertising a lower price “for cash” it has generally complied with the regulations. Although petroleum retailers are not required to advertise all of their prices on a roadside sign, they are required to properly advertise their price “in advance of the sale”, according to Dr. Curran.

Gas stations using two-tier pricing advertise one price for cash (or brand-specific credit cards), but display another price at the pump for credit cards.

Dr. Curran told Historic City News, “With the exception of periodic inspections of retail gasoline pumps, we depend heavily on the public to report gasoline price gouging and other violations.”

In the past month, the state’s Department of Agriculture and Consumer Services has received 10 registered complaints in this area. Two are awaiting inspection, one had several violations, but the others were cleared.

If you find a gas station with a higher pump price than advertised, unless the advertised price indicates “cash-only”, save your receipt and report the station

In Florida, call the Division of Consumer Services’ Consumer Hotline: 1-800-HELPFLA (1-800-435-7352), or, outside Florida, you may dial (850) 488-2221; selecting option (1) followed by option (2) to reach the “petroleum” complaints section.

Petroleum retailers can receive administrative fines for violations of regulations in Florida’s Administrative Code.

Photo credit: Historic City News photographer Michael Gold