With Final Approval of $5.7 Billion Settlement, Interchange Case Moves to Next Phase (Dec. 16, 2013)
A years-long court battle over interchange fees has reached another milestone, but appears to be far from settled. Last week, a Brooklyn, N.Y., judge approved a $5.7 billion settlement to be paid by MasterCard and Visa over allegations the payment networks illegally colluded to fix interchange fees charged to merchants who accept credit card payments. The case dates back to 2005, when a group of retailers filed a class-action lawsuit against the networks. In July 2012, lawyers for the networks and the merchants agreed to a settlement that would require the networks to pay $7.25 billion and grant retailers the right to impose a surcharge for credit card payments. That settlement, however, was criticized by a number of retail groups and merchants—including major retailers like Home Depot, Wal-Mart Stores Inc. and Target Corp.—which claimed the proposed settlement provided the networks with too broad a release from future interchange-related lawsuits. Approximately 8,000 merchants opted out of the deal, reducing the settlement amount to $5.7 billion as of this past summer—still among the largest anti-trust settlements in U.S. history.
Despite the retailers’ protests, U.S. District Court Judge John Gleeson, who presided over the trial, granted preliminary approval to the settlement in November 2012. At the time, Judge Gleeson scheduled a hearing to scrutinize the case more closely and provide merchants with another opportunity to present their objections to the settlement. Last Friday, the judge granted final approval to the settlement in U.S. District Court in Brooklyn. “For the first time, merchants will be empowered to expose hidden bank fees to their customers, educate them about those fees and use that information to influence their customers’ choices of payment methods,” Gleeson wrote in his ruling approving the settlement.
While the approval brings one phase of the case to an end, the legal wrangling could continue. Shortly after Gleeson’s ruling last week, retailers including Walmart, Amazon.com, 7-Eleven Inc. and Barnes & Noble Inc. said they planned to appeal the decision to a higher court. A group of merchants and trade groups, including The Home Depot and the National Association of Convenience Stores, had already begun the process of appealing the settlement last year, but the appellate court told them to wait until the settlement was granted final approval by the lower court before proceeding.