If you’ve never accepted a Visa or MasterCard credit or debit card from any customer at any time between Jan. 1, 2004 and Nov. 28, 2012, please stop reading the rest of today’s blog. But if you have, you’ll be interested in this:
All retailers that accepted a Visa or MasterCard credit or debit card between those dates is a member of the class of plaintiffs in an antitrust case. It covers an estimated eight million retailers that the lawsuit claims were charged excessive fees for accepting Visa and MasterCard because of a conspiracy among the defendants. (American Express and Discover are not defendants in this lawsuit.)
The merchants allege that Visa and MasterCard, the two largest payment networks, violated antitrust law by fixing the swipe fees, which averaged about 2 percent of the purchase price. Banks generate more than $40 billion a year in swipe fees or interchange.
If you haven’t followed this for the eight years it’s been dragging on, this has nothing to do with the lowered fees that came out of the Dodd-Frank financial reform bill of two years ago. In this case, a U.S. District Court for the Eastern District of New York gave preliminary approval last November to a proposed $7.5 billion settlement in the swipe-fee case. Merchants were given until Tuesday May 28 to either opt out or object to the proposed settlement. Those who did neither (presumably all marine retailers) will be considered part of a class that accepts the deal.
It’s now all goes back to Judge John Gleeson to decide Sept. 12 at a fairness hearing on the settlement. Sounds simple? It won’t be, because there are a lot of objections to the deal. So, in the next few days, each side will be submitting briefs for or against the deal and will present their arguments at the hearing. Moreover, no one knows if the judge will make any final decision in September.
The objections are coming from big names, however, like Wal-Mart, Costco, Starbucks, 7-Eleven, Circle K, the National Association of Convenience Stores, National Restaurant Association and National Grocers Association, to name a few. The latter three were among the 19 associations and individual retailers that were party to the class-action lawsuit started back in 2005 and they are now among the proposed settlement’s most outspoken opponents.
If all that’s not enough, Visa and MasterCard recently filed suit in federal court in Brooklyn against some retailers and associations that opted out of the deal, including some of the original 19. They claim their legal action is necessary to “prevent the continuation of endless, wasteful litigation.” According to Bloomberg.com, Visa, MasterCard and the banks are seeking to bar trade groups and retailers from continuing to seek antitrust damages for the swipe-fee practices.
The proposed settlement provides for a temporary reduction in rates for retailers and will allow them to impose surcharges on customer purchases. That policy is controversial at best. But the proposed settlement really doesn’t reform the market or change the situation, according to some of those who object. They say Visa and MasterCard will still be free to set fees, avoid competition and give large merchants discount advantages over small businesses — an unacceptable environment. More change is needed.
The final number of retailers and associations that have opted out or objected to the deal isn’t known yet. That number is expected to be presented to the court soon and, if large enough, could play a significant role in any coming decision. But there certainly seems to be widespread rejection of the proposed settlement. Stay tuned.