NACS and a number of other merchant groups are likely to appeal the Nov. 9 decision of the U.S. District Court for the Eastern District of New York granting preliminary approval to a proposed $7.25 billion settlement of the longstanding antitrust class-action lawsuit filed by merchants against Visa, MasterCard and large banks.
The deal, announced in July, had sparked opposition from some merchants and retail trade groups who argued the proposed settlement would not prevent the interchange or “swipe” fees merchants pay on each credit-card transaction from rising in the future.
They also claimed that releases from future litigation that defendants Visa Inc. and MasterCard Inc. would gain as a result of the settlement would prevent them from bringing claims against the companies in the future.
But as reported in a Raymond James/CSP Daily News Flash, U.S. District Court Judge John Gleeson said during a hearing in Brooklyn Friday that concerns raised so far “have been overstated.” He said opponents at this stage have not raised sufficient arguments to “derail preliminary approval.” Gleason said last month that the deal agreed to by Visa, MasterCard, and several banks appeared to meet the threshold for preliminary approval, but noted the threshold for final approval would be higher, according to a Dow Jones report.
As a result of the preliminary approval, changes to Visa and MasterCard rules are set to take effect in 60 days. One of those rule changes will allow merchants for the first time to charge a fee to customers who pay with a credit card.
If it reaches final approval, the deal would allow Visa, MasterCard and the banks that issue their credit cards to close this chapter on litigation dating back to 2005 that accused them of setting swipe fees at arbitrarily high levels.
The majority of named plaintiffs, including NACS, have rejected the proposed settlement, and approximately 1,200 additional merchants and retailer groups have filed papers objecting to preliminary approval of the proposed settlement. NACS and the other named plaintiffs want a trial to establish that the anticompetitive practices engaged in by the credit-card industry are illegal.
Merchants continue to stress that the proposed settlement would make them worse off than they would be without the settlement, that it provides the credit-card companies with a free pass to abuse merchants and violate the antitrust laws and that it violates merchants’ rights to due process.
The plaintiffs object to the settlement on the grounds that it locks in the broken interchange system, deprives merchants of their right to fight the anticompetitive practices of the Visa, MasterCard duopoly in court and it constrains innovations that could bring competition to the marketplace, such as mobile technology.
The only issues considered at the preliminary approval hearing were whether there are legal defects in the proposal–the overall fairness of the proposal will not be fully considered until later. (CSP Daily News: www.cspnet.com)