NEW YORK 11/13/12)--A federal judge on Friday granted preliminary approval of $7.5 billion antitrust settlement among Visa, MasterCard and several big banks, despite the objections of retailers.
The plaintiff's motion for class settlement preliminary approval was granted by Judge John Gleason and a motion by retailer Home Depot for interlocutory appeal was denied in U.S. District Court for the Eastern District of New York
A group of large retailers filed a brief Nov. 2 requesting that the proposed settlement be rejected. The retailers, representing 19 companies, roughly 17,000 separate retail outlets and more than $150 billion in annual sales, argued the settlement could not legally be certified as a class action because it attempts to force a one-size-fits-all solution onto a diverse group of merchants (News Now Nov. 5).
Retailers also argued that a provision barring all retailers--including those who opt out of the settlement--from filing future lawsuits over swipe fees is impermissibly broad under federal law.
The ATM Industry Association (ATMIA) also announced Friday that it has filed an amicus ("friend of the court") brief in the U.S. District Court of Eastern New York, in conjunction with other opponents of the proposed class-action settlement between merchants and MasterCard/VISA. Although credit unions were not part of the litigation, they would be affected by temporary reduction in credit card interchange, surcharging and buying groups.
The $7.5 billion settlement would require a reduced interchange rate fee (IRF) of 10 basis points for an eight month period, likely beginning in mid-2013, and would apply to all card issuers, including credit unions (News Now Nov. 1).
If the total credit IRF reduction is $1.2 billion, credit unions with credit card programs would lose about $50 million in total revenues, or about 0.5 basis points on their total assets, the Credit Union National Association (CUNA) said. The loss would be concentrated among a relatively small number of credit unions with very active credit card programs.
The proposed settlement also calls for Visa, MasterCard and the banks to create a $6.05 billion fund to repay retailers for past fees charged and says retailers would be permitted to assess "check out" fees or surcharges on credit card purchases, which has previously been prohibited by Visa and Mastercard rules.
The surcharging aspect of the settlement--as well as the provision that consumer-owned credit unions would see a reduction in interchange revenue--are signs that the settlement does nothing for consumers, CUNA President/CEO Bill Cheney has said. Interchange revenue enables credit unions to provide "essential and cost-effective credit card services" to members. "We also know that the temporary reduction in interchange revenue that credit unions will experience will not likely find its way into the pockets of consumers, but will more likely into those of merchants," Cheney said.