Interchange Cases To Yield Consolidated Complaint in 60 Days

A consolidated complaint arising from some 47 interchange lawsuits filed by merchants and merchant groups against the bank card associations over the past seven months will likely emerge within 60 days, with certification of a class coming by fall, a lawyer representing some of the merchants said today. The various cases have been referred to the federal district court for the Eastern District of New York and Judge John Gleeson, well-known in electronic payment circles as the judge who presided over the Wal-Mart case, which resulted in a settlement in 2003 in which the bank card networks agreed to cut signature debit card interchange and pay merchants more than $3 billion. Speaking today to an audience of payments executives at supermarkets, which have been active among retailers in filing the latest round of interchange cases, David A. Balto, an attorney with Robins, Kaplan, Miller & Ceresi LLP, said discovery in the consolidated case could start within 15 months. Failing settlement, trial could start within 28 months, Balto predicted, though he noted this timetable was “fairly optimistic.” Robins, Kaplan touched off the explosion of merchant litigation against interchange by filing last June an antitrust case for five small merchants against Visa USA, MasterCard International, and at least seven banks, alleging interchange is set collusively and enforced by the associations' market power. The firm is emerging as one of a handful that will manage the consolidated case for the merchants and retail associations that have so far filed the separate actions. Speaking at the Food Marketing Institute's Retail Electronic Payments Systems Conference in San Diego, Balto said litigation is the only avenue left to merchants seeking relief from the rising cost of accepting bank cards. He predicted interchange rates, which are set by Visa and MasterCard and charged by issuers to acquirers (which pass them on to retailers as part of the discount rate), could go up another 20% in the next few years without court action to force competitive rate setting. “We're not in this for a pot of gold,” he said. “We're in this for long-term reform [of interchange].” U.S. merchants paid $17.4 billion in card interchange in 2004, according to research from Morgan Stanley. The weighted average interchange rate, according to this research, reached 1.75% in 2004, up 17 basis points since 1998. Total discount fees, which include interchange as well as markups from acquiring banks and processors, totaled $25 billion, according to research by the Merchants Payments Coalition, a Washington, D.C.-based trade group founded a year ago by major retail trade associations to lobby for regulatory relief on interchange costs.