NEW YORK -- A federal judge on Thursday ordered merchant trade groups to correct information on websites intended to encourage retailer opposition to a multi-billion-dollar class-action settlement over interchange or "swipe" fees with Visa Inc., MasterCard Inc. and several large banks, reported Dow Jones.
At a hearing in U.S. District Court, Eastern District of New York, Judge John Gleeson said the groups in question, which are plaintiffs in suits against the payment networks, must add a banner to their websites stating that a judge has determined prior information on the sites to be misleading, the news agency said, citing people who attended the hearing. They must also include a link to a court-approved website with information about the settlement.
Gleeson also ordered the counsel for the trade groups to meet with attorneys representing a proposed class of eight million merchants within a week to determine a plan for fixing the information on the sites, said the report.
At issue are websites that trade groups including the National Association of Convenience Stores (NACS), National Grocers Association (NGA) and other plaintiffs have launched encouraging retailers to object to or opt out of a settlement struck in July that would end years of litigation against Visa, MasterCard and credit-card issuers including Bank of America Corp. and J.P. Morgan Chase & Co.
The litigation, which dates back to 2005, was brought by some of those same merchant trade groups, arguing Visa, MasterCard and large banks conspire to set the transaction fees that retailers pay at arbitrarily levels. The merchants also alleged the defendants have limited their ability to drive down costs by forcing them to abide by rules that have prevented them from surcharging customers who pay with credit cards.
Under the settlement, the defendants have proposed paying $6.05 billion to a class of eight million merchants and temporarily reducing interchange fees by an amount equal to $1.2 billion. In addition, Visa and MasterCard agreed to drop their bans on surcharging, a change that took effect in January and allows merchants to add an extra fee to customers who pay with a credit card.
Gleeson granted preliminary approval to the settlement in November. A hearing on final approval is set for Sept. 12.
The deal has sparked opposition from large merchants like Wal-Mart Stores Inc., Target Corp. and Home Depot Inc., as well as several trade groups that are named plaintiffs in the litigation, including NACS, NGA and the National Restaurant Association.
They argue the settlement will do little to keep the cost of interchange fees from rising and worry the deal grants overly broad releases from future litigation to the defendants. Under the deal, merchants can opt out of the monetary portion of the settlement but are unable to opt out of the rule changes Visa and MasterCard have made.
By opting out, merchants forfeit their right to receive a cut of the payments Visa, MasterCard and the banks have proposed paying to the class.
Some of the groups have posted information on websites in recent weeks urging merchants to file objections to the deal in U.S. District Court as well as opt out of the settlement. NACS, NGA, the National Restaurant Association and other groups urge merchants to file opt-out letters that can be filled out and submitted to the court through the website Merchantsobject.com.
But class attorneys argued the websites contain erroneous information and mislead retailers about their rights under the settlement. In a court filing last month, they asked Gleeson to order the trade groups to correct the information in question and confer with them in the future before disseminating information to the proposed class.
"These unauthorized and misleading communications from the trade association plaintiffs pose a real threat of confusing class members and undermining the court-approved notice processes," the class counsel said in their filing.
Separately, the Retail Industry Leaders Association (RILA), which represents some of America's largest retail companies, announced that it will opt out and object to the proposed swipe-fee class-action settlement.
"RILA and the overwhelming majority of our members agree that the proposed class-action settlement is a bad deal for retailers," said Deborah White, executive vice president and general counsel. "The proposed settlement undermines merchants' legal rights forever and fails to restrain the continued growth of swipe fees increases."
By opting-out and objecting RILA not only registers its opposition to the terms of the deal, but also rejects the financial reward available to it under the terms of the proposed settlement.
Merchants argue that the proposed settlement fails to address the anticompetitive practices that were the genesis for the lawsuits and denies merchants their right to challenge these practices ever again in court. Specifically, RILA said it believes that the proposed settlement is unacceptable because it:
- Locks in the Visa/MasterCard duopoly.
- Provides no relief from interchange rate setting or other rules.
- Denies all current and future retailers their right to bring future legal action related to interchange rules and rate setting, among other things against Visa, MasterCard and the banks.
- Could limit emerging innovations that can bring meaningful competition to the marketplace, such as mobile payments.
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