Credit Card News: Shopping

The antitrust lawsuit brought against Visa and MasterCard in 2005 may have reached a settlement last year, but retailers say the fight is far from over.

Nearly ten years after the initial suit was filed and two years after a $7.25 billion settlement was offered by the credit card payment networks, the National Retail Federation (NRF) and Retail Industry Leaders Association (RILA) are outlining their objections to the settlement and asking an appeals court to overturn its approval.

The $7.25 billion settlement offer in 2012 would have been the largest-ever antitrust settlement in U.S. history. However, ten of the 19 plaintiffs in the case rejected it. The NRF and RILA noted in their brief to the appeals court that 19% of merchants objected to the settlement and 25% opted out of it.

Swipe fee controversy

Interchange fees, also known as “swipe fees” are charged to retailers by credit card processors and usually take 2 to 3% of each transaction. The NRF estimates that swipe fees cost merchants about $30 billion a year.

The settlement gave merchants the right to pass these fees on to customers, something that was previously against the rules. That led to consumer fears about credit cards costing money to use. But these fears were largely unfounded, as the majority of retailers are not charging customers for interchange fees.

Still, accepting credit cards continues to cost money. Retailers have to factor in the credit card processing fees when deciding whether to operate on a cash-only basis or accept credit cards as a form of payment.

RILA and NRF will not be moved

Despite the settlement offer being approved in a Brooklyn court in December 2013, RILA and the NRF appear unwilling to back down. “The proposed settlement not only undermines merchants’ legal rights and fails to restrain Visa and MasterCard’s ability to increase swipe fees with impunity, but it also has broad implications on the rights of others in future class action cases,” said Deborah White, RILA’s executive vice president and general counsel.

The NRF’s senior vice president and general counsel, Mallory Duncan, called the settlement a “backroom deal” and said its approval is “a serious mistake the appellate court needs to correct.”

Although neither organization was a plaintiff in the original lawsuit, both said they are committed to fighting the settlement and taking action to address the lack of competition in the payment processing market.