eNews October 18, 2012

October 18, 2012

News Briefs

  1. Majority of Named Plaintiffs Oppose Visa, MasterCard Interchange Settlement
  2. JPMorgan Chase CEO: Greece Could Threaten EU, EU Won't "Sink" U.S.
  3. Early NACM Survey Results Show Less Concern for the Economy in 2013
  4. Report Predicts Higher German Insolvency Rates, Ability to Weather Storm
  5. August Exports Fall to Lowest Level in Six Months, Still Set a Record
  6. Face of U.S. Alternative Energy Bankruptcies Busy in Court Just Days After Solar Dumping Duties Levied


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Majority of Named Plaintiffs Oppose Visa, MasterCard Interchange Settlement

A slim majority of the named plaintiffs representing merchants in the antitrust lawsuit against Visa and MasterCard over interchange, or "swipe," fees now officially oppose the settlement proposed earlier this summer.

As of October 12, a grand total of 10 of the 19 plaintiffs in the case announced that they would ask U.S. District Judge John Gleason to reject the settlement. Affiliated Foods Midwest, Coborn's, Inc., D'Agostino Supermarkets, Jetro Holdings, Inc. and Jetro Cash & Carry Enterprises, the National Association of Convenience Stores (NACS), NATSO, the National Community Pharmacists Association (NCPA), the National Cooperative Grocers Association (NCGA), the National Grocers Association (NGA) and the National Restaurant Association (NRA) all announced their opposition, hoping to rebuff reports that Visa and MasterCard, along with an ever-dwindling collection of settlement supporters, would ask Gleason to approve the agreement before the end of this week.

These plaintiffs join a growing chorus of other retail and merchant advocates arguing against the settlement, the terms of which allow merchants to pass on their interchange fees to their customers via surcharge. In addition to a recent majority of class plaintiffs, high profile retail groups like the National Retail Federation (NRF) and big-name retailers like Walmart, Target and Lowe's have all indicated their plans to fight the deal.

"The people asking the court to approve the proposed settlement simply do not represent the interests of most merchants, we do," said Hank Armour, president and CEO of NACS."The proposal represents a minority view and must be rejected."

Opponents have repeatedly said that what's missing from the proposed settlement is a mechanism to allow merchants to challenge how interchange fees are set. Furthermore, the proposal would release Visa and MasterCard from several future antitrust claims and lawsuits, making it harder for merchants to mount any more efforts to fight the interchange process. "There is strong concern among our member companies that the proposed settlement will not achieve the litigation's most critical goal—to fundamentally change a broken marketplace in which swipe fees are set," said Dawn Sweeney, President and CEO for the National Restaurant Association. "We don't expect any settlement to address every flaw of the current system, but we cannot allow it to lock in the worst elements."

Even with preliminary approval, the process of full approval is expected to stretch well into 2013. Visa and MasterCard are allowed to cancel the agreement should merchants representing at least 25% of their credit card sales reject it, but even with large retailers opposing the settlement, that 25% threshold might be too high for the opposition to reach. On the other hand, should Judge Gleason reject the proposal, the settlement process goes back to the drawing board and the legal battle will continue.

- Jacob Barron, CICP, NACM staff writer

Make Better Credit Decisions with Industry Credit Groups

Credit groups are an effective management tool, allowing credit professionals of different companies servicing the same customer, regardless of industry or trade, to compare information on collection history and provide a forum for the exchange of data about the most recent payment practices. The purpose of exchanging information is to help group members separate fact from fiction, so competent and realistic credit decisions about a customer can be made.

Managed and operated by NACM Affiliates nationwide, NACM-Canada and FCIB internationally, credit groups:

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  • Assist in the exchange of credit information on common customers
  • Facilitate the receipt and analysis of information to make unilateral credit decisions
  • Provide a forum to discuss the latest developments on credit department procedures,
    equipment and other credit management functions
  • Support the discussion of account information and delinquent account reports
  • Adhere to federal antitrust guidelines

Contact your local NACM Affiliate to learn more about NACM credit groups and to find the group for your industry.

JPMorgan Chase CEO: Greece Could Threaten EU, EU Won't "Sink" U.S.

In a rare public interview conducted by the Council on Foreign Relations, JPMorgan Chase CEO Jamie Dimon said he believes the key to improving United States economic growth lies less in how the European Union dilemma is resolved and more in the domestic policy coming out of Washington. But that's not to say the EU doesn't have a painful road ahead fraught with potential collateral damage.

Dimon, of Greek descent, noted that three important things need to occur to stem the EU fiscal crisis: Spanish banking problems need to be addressed and fixed, member states need to form a "real" fiscal union and finally the timetable on any solutions needs to be rapid. And this timetable could be accelerated, whether members want it to be or not, because of the Greek struggles.

"Obviously, we all want Greece to survive—but Greece is not the issue," he noted. "An exit by Greece on its own is not a catastrophe. But, if they exit before you have a firewall in Italy and Spain, you could have a run on banks they can't stop."

Dimon believes the two key reasons for Europe's political union still exist: to promote some level of harmony (preventing wars from becoming a common occurrence as in the past) and to have the type of common market and infrastructure that helped the United States become a stable economic power.

"I think they muddle through because the alternatives are so bad," Dimon said. "But it'll be a roller coaster: good news, bad news; it's going to work, it's not going to work. The way there is just complicated."

Despite lackluster growth in recent years, Dimon argued the U.S. economy and businesses are generally in good shape and that "Europe isn't going to sink us." What needs improving is the regulatory environment and a lack of clarity therein.

"The wet blanket out there is the uncertainty about taxes, policies, fiscal cliff, the debt-ceiling fiasco, the anti-business—not just sentiment, but regulatory [environment]," he said. "We need good, clear policy."

Dimon said considering solutions like the following would go a long way:

  • Have businesses answer to one agency not a dozen when there is a problem.
  • Actually work with industry when reform is needed, something that was not the case with banks when lawmakers "were just dumping 2,000 or 5,000 pages of rules and then trying to figure out what they mean." He likened the financial reform approach to designing hospitals without consulting doctors.
  • Avoid laws written with regulations like BASEL in mind, which he argues "doesn't make sense for this country."

- Brian Shappell, CBA, NACM staff writer

FCIB's Global Conference Early Hotel Registration Ends October 19—Book Now!

Don't miss the opportunity to get a discounted rate for your stay at the Philadelphia Marriott Downtown during FCIB's 23rd Annual Global Conference in Philadelphia, November 11-13. Enjoy expert insights and best practices from global industry leaders while enjoying unparalleled networking opportunities.

To book your room now, click here.

To see the complete agenda for this year's Global Conference, click here.

We look forward to seeing you in Philadelphia this November!

Early NACM Survey Results Show Less Concern for the Economy in 2013

Early results from NACM's October survey, which asks about credit professionals' biggest concerns for the coming year, indicate that the economy might not be the thing keeping most people up at night.

In previous years, the health of the global economy was the most daunting of credit's concerns, often topping other possible concerns listed in the survey by a landslide. When asked about their biggest concerns looking forward to 2011, a whopping 39.2% of respondents chose "the state and future of the economy." Later, when asked for their biggest concern looking forward to 2012, 28.2% used one of their three choices to pick "lingering uncertainties about the still sluggish economic recovery." Although this marked an 11-point drop in concern for the economy from the year before, it was still the most popular response.

Results of the 2012 edition of the survey, as of this week, show that the decline in concern for the economy has continued, as only about 19% of respondents have used one of their three choices to pick "overall health of the global economy." Responses are continuing to pour in, but should this trend hold until the end of the month, when the survey closes, it will mark the first time in its history where the economy wasn't the credit profession's biggest concern for the coming year.

So far "slow payment, delinquencies and general customer creditworthiness" holds a little more than a two-point advantage over "overall health of the global economy." However, this could change as more people participate.

The survey will remain open until the end of October and is designed for all trade credit professionals. To participate, click here.

- Jacob Barron, CICP, NACM staff writer

Make Your Voice Heard! Respond to NACM's October Survey Today!

As mentioned above, NACM's October survey is the annual survey of what concerns credit professionals have on their minds for the coming year.

Are you worried about the overall economy, or is your company dealing with more fraud? Is outsourcing weighing on your mind, or are your customers' slow payment practices? Or is there something else altogether? Let us know!

Click here to respond today! All participants receive .1 Roadmap points toward an NACM designation and are automatically entered into a drawing to win a free teleconference registration.

Report Predicts Higher German Insolvency Rates, Ability to Weather Storm

A new report by Coface makes what, on the surface, seems like a troubling prediction—that Germany will experience a near-term increase in company insolvencies because of the EU debt situation and its impact on areas such as trade. Granted, the report painstakingly noted a high level of German business resilience. Either way, a moderator at an upcoming FCIB Roundtable event described reaction to mere headline-reading or surface-level summaries as "dangerous," yet seemingly common.

In "Panorama Company Insolvencies," Coface forecasted a near-term increase in company insolvencies in Germany because of the EU situation and the nation's reliance on exporting. However, Coface also noted it won't be as problematic as in other previously stronger economies, namely France, because of German business resilience in several areas. They include: its robust and diversified economy, its decentralized banking system that helps funnel capital to companies, German insolvency laws that encourage close credit monitoring and the large size of many Germany companies which allows more flexibility in recovering from bad debts.

However, unclear and misleading headlines concerning increased German insolvencies are considered troubling to experts like Peter Beyer, trade finance credit manager, EAME, with the firm Syngenta. Beyer, a moderator at FCIB's upcoming October 25 event "The Credit Department as a Profit Centre—Your 'Value' in the Supply Chain" in Zurich, Switzerland, believes that surface-level coverage of such economic happenings "make our credit management life today more difficult and complex since most leaders [company decision-makers] are 'headline-readers,' and a qualitative assessment of such a message is missing."

Granted, Beyer did say it was worth noting, as Coface also indicated in the report, that Germany is one of the most mature economies of the world that boasts solid, reliable banking and legal systems. Even so, he said the key to any of those points is looking at the specific over the general: company sizes, industry/industry segment, debt ratios and so forth. In short, people shouldn't base their assertions on a one-size-fits-all headline mentality in Germany, the EU or beyond.

- Brian Shappell, CBA, NACM staff writer

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August Exports Fall to Lowest Level in Six Months, Still Set a Record

The United States Department of Commerce announced last week that total August exports fell $1.9 billion from July down to $181.3 billion, the lowest level in six months. Imports also fell in August, but only by $0.2 billion, resulting in a 4.1% increase in the nation's trade deficit, which widened to $44.2 billion in August from July's revised figure of $42.5 billion.

Responsibility for the 1% decline falls solely on the goods sector, where exports decreased by $2.1 billion between July and August. The service sector saw a $0.2 billion increase in exports, resulting in a monthly all-time record of $52.8 billion. Decreases in the goods sector came primarily from fewer exports of industrial supplies and materials, which fell $1.2 billion in August, and of feeds, foods and beverages, which fell $1.1 billion.

Wider trade deficits are often considered a drag on economic growth as it indicates that U.S. companies are earning less on their overseas sales, while U.S. consumers are spending more money on products manufactured abroad. Nonetheless, exports remain at historically high levels, having grown at an annualized rate of 12.7% over the last 12 months compared to 2009. Total exports over the last year are valued at $2.173 trillion, which is nearly 37.6% above the total level of exports in 2009.

As of the August figures, the top ten buying countries with the largest annualized increases in purchases of U.S. goods, compared to 2009, were Panama (34.9%), Chile (27.8%), Argentina (26.3%), Turkey (26.3%), Russia (25.7%), Hong Kong (25.6%), Peru (25.3%), the United Arab Emirates (21.8%), Ecuador (21.6%) and Venezuela (20.9%).

- Jacob Barron, CICP, NACM staff writer

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Face of U.S. Alternative Energy Bankruptcies Busy in Court Just Days After Solar Dumping Duties Levied

On the heels of a United States Commerce Department decision to levy significant anti-dumping penalties on Chinese-based companies selling solar energy products domestically, the most controversial of California's solar energy companies has launched its own lawsuit against a former Chinese competitor. And it's all happening while the failed solar energy cell manufacturer defends its bankruptcy plan in U.S. Bankruptcy Court.

Commerce delighted struggling U.S.-based solar manufacturers—past and present—last week by levying anti-dumping tariffs reported to be between 18% and just under 250% amid allegations of illegal government assistance and Chinese "dumping" (selling below cost) of solar power-related products into the U.S. market. Such dumping practices, as well as illegal government subsidies to their Chinese competitors from their government, were cited by several of the companies in the industry that sought bankruptcy protection within the last year. Among them was Solyndra, though the company is also under federal investigation for fraud and in the political campaign spotlight because of its ties to the Obama Administration and the more than a half-billion dollars in grants they received from the U.S. government.

Solyndra was due to appear before U.S. Bankruptcy Court for the Third Circuit Judge Mary Walrath on October 17 to make arguments for approval of its bankruptcy plan. Therein, its assets would be liquidated even though its parent company would reorganize and continue to operate if its plan is confirmed without revision. Among those urging the judge not to accept the plan are the Internal Revenue Service, the Department of Energy and local officials in California.

Solyndra also filed suit against a Chinese manufacturer and its U.S. subsidiary in U.S. District Court in Oakland, CA. The suit asks for a $1.5 billion judgment against Suntech Power Holdings Co., alleging the Chinese-owned manufacturer's conduct "constitutes an unlawful conspiracy and combination to fix prices at predatory levels and to monopolize," thus violating the federal Sherman Antitrust Act and California's Unfair Practices Act.

- Brian Shappell, CBA, NACM staff writer


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