The proposed settlement of a merchants’ lawsuit over credit card fees that may cost Visa Inc. (V), MasterCard Inc. (MA) and banks as much as $7.25 billion is probably worthy of initial approval, a federal judge said.
“I have reviewed the settlement agreement, and at first blush it appears to satisfy the requirements for preliminary approval,” U.S. District Judge John Gleeson in Brooklyn, New York, said in an order yesterday.
The order, containing Gleeson’s first public comments on the deal since it was unveiled in July, came in response to objections lodged by an expanding group of retailers and trade groups who contend it’s unfair.
Gleeson said he will hear arguments against preliminary approval of the settlement on Nov. 9. He declined a request to form a committee for objecting retailers and said there would be an opportunity for a more thorough discussion at a later hearing on final approval.
The deal, intended to cover about 7 million retailers, would put an end to about seven years of litigation that has dogged Foster City, California-based Visa and Purchase, New York-based MasterCard. The suing merchants allege that banks conspired with the card companies to fix the so-called interchange fees that retailers are charged when customers pay with credit cards.
Some retailers and their trade associations oppose the deal, saying it’s too generous to the card companies and grants too much leeway to raise rates in the future.
Vocal opponents of the deal include the Retail Industry Leaders Association, the National Retail Federation, the National Restaurant Association, the National Community Pharmacists Association and the National Association of Convenience Stores, as well as retailers Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT)
Jeffrey Shinder, a lawyer representing some of those groups, told the judge in an Oct. 23 letter that many merchants don’t think the deal qualifies for initial approval “because of its obvious and facial defects.”
Gleeson said the objections will receive careful consideration.
“I am mindful, however, that the threshold for preliminary approval of a proposed class action settlement is meaningfully lower than the threshold for final approval,” he said in his order.
The ruling puts the settlement on course for approval sooner than expected, K. Craig Wildfang, a lead lawyer for plaintiffs, said in a phone interview. Wildfang and other attorneys in the case had forecast an initial hearing would take place in December or early 2013.
“After seven years of negotiation and two years of mediation, this is the best possible settlement for all involved,” Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a credit-and-debit-card industry trade group, said in an e-mail. “It’s time to end this epic battle, and put our differences to rest.’
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).
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