Swipe Fee Settlement Gets Preliminary OK

“We remain convinced that this is a bad deal and we will look at our options to appeal this decision,” says NACS CEO.

A U.S. judge on Friday, Nov. 9, granted preliminary approval to the proposed $7.2 billion swipe fee settlement between merchants and Visa Inc and Mastercard Inc over credit card fees, despite objections from hundreds of retailers, Reuters reported.

If the deal receives final approval from U.S. District Court Judge John Gleeson of Brooklyn N.Y. it would be the largest federal antitrust settlement in U.S. history. But retailers are fighting to get their day in court.

“This proposal benefits no one but lawyers and credit card companies, and should not be forced on the retail industry or retailers’ customers,” said National Retail Federation (NRF) Senior Vice President and General Counsel Mallory Duncan. “It’s a morass of legal flaws, and rather than bringing about reform it would only entrench the anticompetitive behavior of the card companies while putting them beyond the reach of the law. It should be rejected on its face.”

NRF is not a party to the lawsuit, but its members and the companies named in the brief would be affected if the case is approved as a class action. NACS and a number of other merchant groups are likely to appeal the Nov. 9 decision.

The proposed settlement was announced in July and would include a $7.25 billion payout from the banks, but would allow them to violate antitrust laws to merchants’ detriment in the future. The majority of named plaintiffs – including NACS – have rejected the proposed settlement, and approximately 1,200 additional merchants and retailer groups have filed papers objecting to preliminary approval of the proposed settlement.

“We remain convinced that this is a bad deal and we will look at our options to appeal this decision. This bad deal should not be forced upon the vast majority of merchants and – their customers – who do not want it,” said NACS President and CEO Hank Armour.

The path to final approval is a long one. NACS and the other named plaintiffs want a trial to establish that the anticompetitive practices engaged in by the credit card industry are illegal.

The opposition to the proposed settlement at the preliminary approval stage has been unprecedented. Merchants continue to stress that the proposed settlement would make them worse off than they would be without the settlement, that it provides the credit card companies with a free pass to abuse merchants and violate the antitrust laws and that it violates merchants’ rights to due process.

“The merchant community is deeply committed to reforms that bring transparency and competition to the broken electronic payments market. The volume and diversity of those objecting to this flawed proposal is remarkable and continues to grow. Today’s hearing was the first of many opportunities for the merchant community to highlight the substantial flaws in the proposed settlement,” said Jeff Shinder, managing partner, Constantine Cannon LLC. “We will seek to appeal today’s ruling in order to stop the misleading notice from being sent to merchants and to put the brakes on a proposed settlement that would cause significant harm to merchants and ultimately their customers.”

Shinder is counsel to a majority of named class plaintiffs in the case that object to the settlement on the grounds that it locks in the broken interchange system, deprives merchants of their right to fight the anticompetitive practices of the Visa, MasterCard duopoly in court, and it constrains innovation in innovations that could bring competition to the marketplace, such as mobile technology.

The named class plaintiffs opposing the proposed settlement of the case, which is known as “In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation,” are Affiliated Foods Midwest, Coborn’s, Inc., D’Agostino Supermarkets, Jetro Holdings LLC, National Association of Convenience Stores (NACS), NATSO, National Community Pharmacists Association (NCPA), National Cooperative Grocers Association (NCGA), National Grocers Association (NGA), and National Restaurant Association (NRA).

The only issues considered at the preliminary approval hearing were whether there are legal defects in the proposal – the overall fairness of the proposal won’t be fully considered until later.

 

 

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