NRF Asks Judge to Reject Swipe Fee Settlement
WASHINGTON -- November 01, 2012
The National Retail Federation and more than a dozen of the nation’s most
prominent retailers today asked a judge to reject a proposed class-action
settlement of a federal antitrust lawsuit, saying it would not bring credit
card swipe fees charged by Visa and MasterCard under control and does not give
retailers who oppose it an adequate mechanism to opt out.
“The proposal pending before the court does nothing to keep these soaring fees
from continuing to drive prices higher for American consumers, and would block
merchants who believe in true swipe fee reform from ever having their day in
court,” NRF Senior Vice President and General Counsel Mallory Duncan said.
“While the remaining parties would like to treat preliminary approval as a
routine procedural step, the court should recognize that this settlement is so
legally flawed it cannot be tweaked into fairness.”
“We question whose interests are being served here – merchants and their
customers or the card companies and lawyers,” Duncan said. “Instead of
improving the situation, the proposed settlement would cast in stone the very
problems that need to be fixed. And while the settlement gives pennies on the
dollar to merchants, it seeks three-quarters of a billion dollars for the
lawyers involved. Sophisticated retailers who have scrutinized the tentative
deal realize it provides relief for no one, and don’t want this blatant
endorsement of the credit card industry’s abuses pushed on them or their
Nine mostly small merchants supporting the settlement filed a motion with U.S.
District Court Judge John Gleeson in Brooklyn, N.Y., on October 19 asking for
preliminary approval of the proposal, and oral arguments are scheduled for
November 9. Preliminary approval would begin a months-long process in which
all retailers who accept Visa and MasterCard credit cards would be sent
notices giving them the opportunity to either accept the settlement or opt out
of part of it. Arguments on the merits of the settlement and whether it should
be given final approval would not begin until sometime next year.
NRF argued in a brief filed today that preliminary approval should be denied,
saying the settlement cannot legally be certified as a class action because it
attempts to force a one-size-fits-all solution onto an wildly diverse group of
merchants. NRF also argued that a provision barring all retailers – including
those who opt out of the settlement and even those who do not yet exist – from
filing future lawsuits over swipe fees is impermissibly broad under federal
law. The provision would allow the card industry to continue its
anticompetitive practices and fee increases unchallenged.
NRF said the unusual structure of the settlement gives merchants who oppose it
no mechanism to truly opt out. Rather than being able to opt out entirely,
retailers would only be able to reject their share of the $7.25 billion
offered as compensation for past price fixing, and would remain bound by
flawed injunctive relief that would entrench current card industry practices
rather than take steps to limit future fee hikes.
While the $7.25 billion figure has been touted as a record antitrust
settlement, NRF and its members believe effective injunctive relief that would
keep fees from rising going forward is more important. The amount represents
less than three months’ worth of swipe fee collections despite the eight-year
period covered by the lawsuit.
The injunctive relief proposed in the settlement fails to reform the
cartel-like system where Visa and MasterCard set a rigid schedule of swipe
fees that all banks follow. It does nothing to disclose the hidden fees or
otherwise create transparency that would encourage competition that would lead
to lower fees. Ostensibly, merchant bargaining groups could be recognized, but
that is no change from current law. And while some merchants would
theoretically be given the right to surcharge as a bargaining chip to hold
down fees, the provision is subject a wide variety of card company
restrictions, would be illegal in 10 states, and ignores the goal of merchants
to reduce prices paid by their customers, not increase them.
NRF is not a party to the suit, but represents thousands of retailers who
would be affected if the case is approved as a class action. Retailers joining
NRF in today’s brief included 17 companies and two associations that are not
parties to the suit but would be affected: Target Corp., Macy’s Inc., J.C.
Penney Corporation Inc., GAP Inc., Limited Brands Inc., Dillard’s Inc., Big
Lots Stores Inc., Ascena Retail Group Inc., Neiman Marcus Group Inc.,
Abercrombie and Fitch Co., Saks Inc., Chico’s FAS Inc., Bob Evans Farms Inc.,
Papa John’s International Inc., CKE Restaurants Inc., American Signature Inc.,
Boscov’s Inc., the American Booksellers Association and the National
Association of College Stores.
Swipe fees are a hidden charge banks collect each time a Visa or MasterCard
card is swiped to pay for a purchase. Combined credit and debit card swipe
fees tripled over the past decade to about $50 billion a year – driving up
prices an estimated $427 for the average household – before debit swipe was
capped by the Federal Reserve last year. Credit card swipe remains unregulated
and averages about 2 percent of each transaction, amounting to about $30
billion a year, or $250 per household.
As the world’s largest retail trade association and the voice of retail
worldwide, NRF represents retailers of all types and sizes, including chain
restaurants and industry partners, from the United States and more than 45
countries abroad. Retailers operate more than 3.6 million U.S. establishments
that support one in four U.S. jobs – 42 million working Americans.
Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the
nation’s economy. NRF’s Retail Means Jobs campaign emphasizes the economic
importance of retail and encourages policymakers to support a Jobs, Innovation
and Consumer Value Agenda aimed at boosting economic growth and job creation.
Read NRF Brief
National Retail Federation
J. Craig Shearman, 202-626-8134
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