WASHINGTON -- The National Retail Federation (NRF) is applauding the U.S. Supreme Court for declining to take up a $5.7 billion settlement on retailers’ claims that Visa and MasterCard unfairly set credit-card interchange or “swipe” fees.
“If this settlement had been approved, the structure of fees that drive up the prices of everything consumers buy would have been cemented into place forever,” said Mallory Duncan, NRF senior vice president and general counsel for Washington, D.C.-based NRF. “Now something can finally be done to bring these fees under control.”
The Supreme Court’s move leaves in place last year’s ruling by the 2nd U.S. Circuit Court of Appeals, which struck down a $7.25 billion antitrust settlement in a lawsuit brought on by a small group of retailers and trade associations representing the retail industry. The settlement was reached in 2012; while it was once worth $7.25 billion, the value dropped to $5.7 billion after reductions for about 8,000 merchants who dropped out of the damages portion of the case, Bloomberg reported.
Had the Supreme Court accepted the settlement, card companies and banks would have been protected from future lawsuits against exorbitantly high swipe fees.
The Retail Industry Leaders Association (RILA) is also praising the Supreme Court for its decision.
“[The] settlement crafted by the banks and the credit cards was badly flawed,” said Deborah White, senior executive vice president and general counsel for RILA, Arlington, Va. “Merchants and consumers continue to suffer from the anti-competitive practices of banks and card networks. We now have a fresh opportunity to curb these unfair practices.”
Amazon, Target, Starbucks and dozens of other retailers, including many convenience stores, opposed the settlement and urged the Supreme Court to reject the appeal without a hearing.
The retailers said the accord was unfair because it stripped them of their right to sue Visa and MasterCard over fee practices that weren’t addressed in the settlement. The retailers faulted the agreement for giving the lawyers pressing the suit $545 million in fees.
The settlement “is a confiscation—one that pays a group of lawyers over a half billion dollars to forever insulate Visa and MasterCard” from lawsuits, the retailers argued in court papers.
A group of smaller retailers tried to revive the settlement, arguing that the litigation had produced major improvements in credit-card fees practices, Bloomberg reported. The settlement lets merchants impose surcharges on credit-card transactions in the states where that practice is legal.
“As a result of this historic reform, merchants will be empowered to educate consumers about the true cost of credit-card usage,” the appeal argued.
Visa, MasterCard and their member banks supported the appeal. They argued that “the overwhelming majority of plaintiffs were satisfied with the deal and did not object.”
The justices’ decision leaves the 2005 lawsuit pending in U.S. District Court in New York, where retailers could go to trial, pursue a revised settlement or focus on other lawsuits over the issue that have been filed more recently, the NRF said.
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