MasterCard Incorporated appears set to take action against vape retailers in 2017. Some of it was expected, as per the recent FDA regulations. Some of it is arguably excessive. The ones set to be hit the hardest are online vape retailers.
I recently obtained an email sent from credit card processor US Merchant Systems that was sent to a vaping retailer friend of mine. He has a brick-and-mortar store, as well as an online business. The email was a warning that his business must be in compliance with MasterCard’s Business Risk Assessment and Mitigation (BRAM) program. Here are the BRAM requirements from the email that pertain to brick-and-mortar vape shops.
- Age Restrictions are implemented– Merchants must perform physical age verifications in stores and electronic verifications online
- Merchants must meet all new FDA requirements for labeling, marketing, advertising, promotion, and manufacturing. More information on FDA requirements can be found here: www.fda.gov/TobaccoProducts
- Merchants selling e-cigarettes and vape products meet all state and federal law requirements. Please note that state laws may vary. More information can be found here: http://publichealthlawcenter.org/resources/us-e-cigarette-regulations-50-state-review
MasterCard’s BRAM requirements listed above were expected and reasonable, given the FDA ruling. What was somewhat surprising was MasterCard’s BRAM requirements for online vaping businesses. The following are the bullet points that pertain to “card-not-present (e-commerce and mail order/telephone order) e-cigarette and vape merchants.”
- Registration will be required with MasterCard which costs $500/year per merchant, effective January 15, 2017
- Merchant must have a health warning label visible on the website on the harms of nicotine usage
- Adult signature required upon delivery
- Billing terms must be clearly disclosed on the merchant’s website
The last three items were expected, but MasterCard’s $500 annual charge caught some online vape retailers off guard. Some believe that the charge is unfair, while others believe it’s a lazy way for MasterCard to cover its ass (a technical business term). With online age verification being implemented by many vaping businesses and an adult signature required, some are wondering why the fee is necessary. The responsibility for any online sales that go to underage customers belongs to the retailer.
Running a vaping business is becoming more difficult and more expensive. Adding a $500 annual fee to accept MasterCard is another “cost of doing business.” Some online vape shop owners plan to just suck it up and pay the fee; they don’t want to risk losing MasterCard or their credit card processor. Some bolder store owners plan on fighting back and dropping MasterCard, losing access to millions of people with MasterCard credit cards and debit cards.
At the end of the day, both choices suck. You either pay an unfair annual fee to keep doing business or lose potential sales taking a principled stand. Out of curiosity, if you were running an online store, what choice would you make?