Visa Inc and MasterCard sued trade groups and retailers that rejected a $7.25 billion settlement in a price-fixing suit and asked a court to rule that the card companies’ fee practices weren’t illegal.
The settlement, described by plaintiffs in that case as the largest in an antitrust lawsuit, would end an eight-year legal battle over the swipe, or interchange, fees charged to merchants when customers use credit cards to pay. The plaintiffs accused Visa and MasterCard, the two largest US payment-card firms, of illegally fixing the fees – according to Bloomberg.
Visa, MasterCard and several banks said in a complaint filed yesterday in federal court in Brooklyn, New York, that their suit is ‘necessary to prevent the continuation of endless, wasteful litigation.” They seek to bar the trade groups and retailers from seeking antitrust damages for the fee practices.
Under the proposed settlement agreement, Visa, MasterCard and major banks can back out of the deal if retailers dropping out make up more than 25% of the companies’ total credit card payment volume. The top 100 merchants in the US represent about 25% of the total volume, according to a July analysis by Keefe, Bruyette & Woods. Of those, about 15 have already agreed to their own settlement with Visa and MasterCard.
Vocal Opponents
Parties targeted by the suit include the National Association of Convenience Stores, the National Grocers Association, the National Restaurant Association, Affiliated Foods Midwest Cooperative and D’Agostino Supermarkets. All of them were part of litigation leading to the proposed settlement and now are ‘among the most vocal opponents” of the deal, according to the complaint.
Dozens of other retailers, including Wal-Mart Stores and Target, also oppose the accord. They have claimed it falls short of providing recovery for the billions of dollars in fees collected over the years and contains provisions giving the card companies freedom to raise rates in the future.
A group of 17 retailers led by Target filed their own lawsuit on May 23 in Manhattan federal court seeking damages for the swipe fees.
Jeffrey Shinder, a lawyer for retailers and trade groups named in the suit along with other companies opposed to the settlement, declined to immediately comment on the complaint filed yesterday.
Legal Defects
In a statement in November, Shinder said the settlement had ‘fatal legal defects.” At the time, the entities targeted by yesterday’s lawsuit were announcing their opposition to the accord. Shinder has argued in previous hearings before US District Judge John Gleeson that legal releases, protecting the card firms and banks from future lawsuits, are particularly unfair.
The settlement received tentative approval from Gleeson in November. A hearing on final approval is set for September 12.
‘After years of negotiation, the same retailer trade groups that willingly agreed to a multibillion dollar settlement are now turning around and demanding even more,” said Trish Wexler, a spokeswoman for a coalition representing the interests of the payment card industry. ‘Enough is enough – these tired old arguments and this battle needs to be put to bed.”
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