Retail Groups Submit Brief Opposing Swipe Fee Settlement

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On November 1, 20 retailers and trade groups, including the American Booksellers Association, the National Association of College Stores (NACS), and the National Retail Federation (NRF), asked a judge to reject a proposed class-action settlement of a federal antitrust lawsuit over skyrocketing Visa and MasterCard credit card swipe fees.

In a brief submitted to the U.S. District Court for the Eastern District of New York, the groups argued that the proposed settlement would fail to bring credit card swipe fees charged by Visa and MasterCard under control and does not give retailers that oppose the settlement an adequate mechanism to opt out.

“The proposal pending before the court does nothing to keep these soaring fees from continuing to drive prices higher for American consumers, and would block merchants who believe in true swipe fee reform from ever having their day in court,” NRF Senior Vice President and General Counsel Mallory Duncan said in a statement. “While the remaining parties would like to treat preliminary approval as a routine procedural step, the court should recognize that this settlement is so legally flawed it cannot be tweaked into fairness.”

Nine merchants supporting the settlement filed a motion with U.S. District Court Judge John Gleeson in Brooklyn, New York, on October 19 asking for preliminary approval of the proposal. Oral arguments are scheduled for Friday, November 9. Preliminary approval would start a process in which, over a period of many months, all retailers that accept Visa and MasterCard credit cards would be sent notices giving them the opportunity to either accept the settlement or opt out of part of it. Arguments regarding the merits of the settlement and whether it should be given final approval would not begin until sometime next year, NRF reported.

In the brief submitted to the court, the groups wrote: “Together with other putative class members filing objections, these Objectors protest in their strongest voice a settlement that would eliminate their future ability to challenge Visa’s and MasterCard’s continuing and new unlawful conduct.” The groups argued that “this settlement passes off as a remedy a so-called ‘new right’ that would allow merchants to pass on to their customers as ‘surcharges’ the amount of Visa’s and MasterCard’s unlawful overcharges. Raising consumer prices by adding an ‘interchange tax’ is no remedy for Visa’s and MasterCard’s continuing monopoly abuse.”

In a press release, NRF noted that “the unusual structure of the settlement gives merchants who oppose it no mechanism to truly opt out. Rather than being able to opt out entirely, retailers would only be able to reject their share of the $7.25 billion offered as compensation for past price fixing, and would remain bound by flawed injunctive relief that would entrench current card industry practices rather than take steps to limit future fee hikes.”

NRF also pointed out that “the injunctive relief proposed in the settlement fails to reform the cartel-like system, where Visa and MasterCard set a rigid schedule of swipe fees that all banks follow. It does nothing to disclose the hidden fees or otherwise create transparency that would encourage competition that would lead to lower fees.”

Other companies signing the November 1 brief were Target Corporation, Macy’s Inc., J.C. Penney Corporation Inc., GAP Inc., Limited Brands Inc., Dillard’s Inc., Big Lots Stores Inc., Ascena Retail Group Inc., Neiman Marcus Group Inc., Abercrombie and Fitch Co., Saks Inc., Chico’s FAS Inc., Bob Evans Farms Inc., Papa John’s International Inc., CKE Restaurants Inc., American Signature Inc., and Boscov’s Inc.