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Retail Groups Oppose Proposed Swipe Fee Suit Settlement

 

Visa and Mastercard reached a tentative settlement of the now 13-year-old antitrust lawsuit brought by a class of merchants challenging the "interchange fees" charged by the companies. The settlement includes a 6.2-billion-dollar fund to compensate merchants for the interchange fees charged by Visa and Mastercard, which allegedly violated the antitrust laws. The proposed settlement has been widely criticized by the National Retail Federation and other groups representing merchants because it contains no provisions to restrain the ability of Visa and Mastercard to continue to charge what the class of merchants believes are artificially high interchange fees. The lawsuit alleges that Visa and Mastercard used their vast market power to fix the fees charged to merchants on consumer credit card transactions.

The proposed settlement comes on the heels of a Court of Appeals rejection of a previous multi-billion-dollar settlement in which all class members had to give up their rights to sue Visa or Mastercard in the future, even if the practices that formed the basis of the class action continued. In order to prevent a settlement that was unfair to merchants, the court required the class to be divided into two separate classes (with different attorneys representing each class), one seeking money damages for past actions and one seeking to curb the alleged illegal price fixing in the future. The new proposed settlement provides billions of dollars to pay for past practices but does nothing to prevent the same allegedly illegal price fixing from continuing. Anyone who participates in the settlement by claiming a piece of the 6.2-billion-dollar fund must agree not to sue Visa or Mastercard for a period of five years.

The proposed settlement will have to be approved by the New York federal district court in which the lawsuit is pending. There is likely to be substantial opposition to the settlement from merchants and trade associations who claim the settlement does nothing to change the pattern of illegal price fixing that caused the lawsuit to be filed. It is also likely that the settlement will be challenged by the Nation's largest retailers (e.g., Starbucks, Lowes, Walmart and others) who opted out of the previous settlement and pursued their claims against Visa and Mastercard separate from the merchant class. Even if the settlement is approved by the court, there is the possibility that the approval will be challenged in an appeal to the Second Circuit Court of Appeals. For these reasons, the fate of the now tentative settlement will not likely be decided this year and may be delayed even longer.

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