Retailer Trade Groups Seek To Overturn Judge’s Approval of Interchange Settlement

Two retailer organizations dissatisfied with a $5.7 billion settlement of a class-action antitrust case alleging unfair credit card interchange rates have filed the next step in their appeal of the settlement.

The National Retail Federation and the Retail Industry Leaders Association said Monday they filed a joint brief with the 2^nd U.S. Circuit Court of Appeals in New York in their efforts to see a Dec. 13 ruling by U.S. District Court Judge John Gleeson overturned. Each organization filed appeals following the ruling. The case dates to 2005.

“Approval of a mandatory settlement of such breathtaking scope in the face of widespread and substantive objection is unprecedented and warrants reversal,” the brief said.

Now the defendants, including Visa Inc., MasterCard Inc. and a handful of major banks, can file their brief on the appeal, which likely will be followed by oral arguments, says Mallory Duncan, NRF senior vice president and general counsel.

The retailer groups contend the settlement strips away many rights merchants have against Visa and MasterCard, Duncan says. “Unfortunately, the judge could only deal with what he had in front of him,” he says. “He had primarily mom-and-pop retailers against some very sophisticated big banks and credit card companies.”

A broad range of retail trade groups, as well as some 7,800 retail companies that have opted out of the settlement since it was reached in July 2012, objected primarily to the agreement’s provision that, in return for receiving relief, merchants must forfeit the right to sue the defendants in the future on the same issues.

Neither Visa nor MasterCard responded to inquiries by Digital Transactions News.

Ultimately, Duncan says, retailers want transparency in interchange pricing. “Retailers don’t know what they’re paying until the end of the month,” he says. “And they want competition. They want to be able say this type of payment is too expensive, they don’t want to take it.”

It’ll be several months for the process to play out. “The recent filing indicates this matter is not going to be over any time soon,” says Howard Herndon, an attorney at Frost Brown Todd LLC, a Nashville, Tenn.-based law firm. “This is part of a longer process, and a reminder there is still frustration with the existing interchange system.”

Though the range of outcomes could include overturning the approval or remanding the case back to the judge to address matters differently, it’s difficult to gauge what the court of appeals will do, Herndon says. “The subject of the appeal is the approval of the settlement,” he says. “That is different from whether or not Visa or MasterCard committed any competitive acts in violation of the law. That would still have to be proven.”