Swipe Fee Ruling Expected by Mid-January

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A U.S. district court judge is expected to issue a ruling before mid-January on the proposed swipe fee settlement reached last year in a class-action lawsuit that is now in its eighth year, according to BPAA News. Close to 8,000 merchants representing at least 25 percent of Visa and MasterCard volume opted out of the proposed $7.25 billion antitrust lawsuit settlement, including 10 of the original 19 named class plaintiffs. Three associations — the American Booksellers Association (ABA), the National Association of College Stores, and the National Retail Federation (NRF) — and 17 retail and restaurant companies filed a brief in opposition to the settlement in November 2012.

At a fairness hearing held last month, opponents, including NRF and the National Association of Convenience Stores (NACS), argued that the settlement will hurt merchants because it protects Visa and MasterCard from future lawsuits.

“This settlement is worse than losing at trial,” Henry Armour, president and chief executive officer of NACS, said at the hearing. The Wall Street Journal reported that Judge John Gleeson “peppered” both opponents and proponents with questions at the hearing and stressed that the settlement is a compromise and that neither side is likely to get everything they want.

NRF urged the judge to either “right or reject” the proposed settlement, which it said needs to do more to bring swipe fees under control, Convenience Store News (CSN) reported.  At the hearing, NRF attorney Andrew Celli testified that retailers should be given the ability to fully opt out of the settlement. “As it stands, the settlement rewards the perpetrators and traps the victims,” Celli said. “But it is not hopeless. It can be made fair. You have the power to make it so.”

In April 2013, ABA recommended that members opt out and object to the settlement.  In an e-mail to members, ABA CEO Oren Teicher said this option was the “most complete way” for booksellers to express their opposition to the settlement. “It is our belief that the settlement does not offer meaningful changes to the interchange or ‘swipe fee’ rules that are the centerpiece of the case,” he wrote. “And, importantly, the settlement denies all current and future merchants their right to bring future legal action related to interchange rules and rate setting, among other things, against Visa, MasterCard, and the banks.”

In related news, on Thursday, October 3, a federal judge in New York ruled that a New York State law that banned surcharges on credit card purchases was unconstitutional, as reported by the Wall Street Journal

The challenge to the ban was brought by five retailers, including a hair salon and an ice cream parlor, which argued that a retailer’s ability to impose surcharges would make customers aware that credit cards incur costs on retailers and retailers would then be able to direct consumers to use other, lower-cost forms of payment, WSJ reported.

Judge Jed Rakoff ruled the ban violates the retailers’ freedom of speech, as it prohibits them from letting the customers know they pay fees to accept credit cards.