Court’s Greenlight for Settlement Hardly Signals Battle’s End As Merchants Gird for Appeals

Retailers, and the trade associations representing them, that are opposed to a $5.7 billion settlement of a class-action antitrust case challenging credit card interchange rates are contesting federal judge John Gleeson’s affirmation Friday of the settlement amount.

Defendants in the 8-year-old litigation, which was heard in the District Court of the Eastern District of New York, include Visa Inc., MasterCard Inc., and a handful of major banks.

“This decision will be appealed,” says Deborah White, executive vice president and general counsel, of the Retail Industry Leaders Association, an Arlington, Va.-based group representing many big-box retailers. “Already notices of appeal have been filed with the Second U.S. Circuit Court of Appeals,” she says.

Gleeson’s order Friday does not signify the end is anywhere near for the case, White says. The settlement must be substantially improved, she says. “What we want the Second Court of Appeals to tell the District Court is that it didn’t do the analysis properly,” she says. “Because the proposed settlement does violate merchant due- process rights, the lower court should not have approved it, and rather should have come up with a settlement that was more fair to everyone.”

Merchants are dissatisfied with several elements of the proposed settlement. RILA says it locks in a duopoly controlled by Visa Inc. and MasterCard Inc., provides no interchange rate-setting relief, forces retailers to abandon possible future legal action, and could limit payment innovation.

“We are disappointed in the decision,” White says. “We expected a more balanced decision from Judge Gleeson. In the absence of that, we will participate in the appeal to the Second Circuit.”

The Merchant Advisory Group, a Minneapolis-based organization that represents big-box merchants on payments issues, also says Gleeson’s order will not appease many retailers.

“This settlement will do little to satisfy the demands of the broad merchant community that a more equitable card-payment system is needed,” the association said in a statement. “Contrary to the views expressed by the card networks, as well as the many public commentators who regularly express sentiments on their behalf, this case will not close the ongoing dispute with the networks by merchants. Merchants will continue to seek relief in the courts, through legislation, with regulators charged with enforcing existing laws addressing unfair competition and by creating alternate payment schemes to compete directly with the card networks.”

As for the approximately 7,800 retailers and trade associations that have opted out of the settlement, any legal action they have undertaken will continue, White says.

But many of those actions may be under a voluntary stay, says Anita Boomstein, a partner at Hughes Hubbard & Reed LLP, New York City. “From what I understand they entered into a voluntary stay pending approval [of the settlement case],” Boomstein says. “They will continue to prosecute their own claims once the stay is lifted. They hope to get better redress than the merchants in the class that accept the settlement.”