A federal judge last month approved an estimated $5.7 billion class-action settlement between retailers and two major credit card companies. The approval came despite thousands of retailers complaining that the agreement on the fees the credit companies charged was inadequate.


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Many retailers unhappy with credit card fee deal

January 6th, 2014

NEW YORK – A federal judge last month approved an estimated $5.7 billion class-action settlement between retailers and two major credit card companies. The approval came despite thousands of retailers complaining that the agreement on the fees the credit companies charged was inadequate.

The credit card fee settlement, believed to be the largest in a U.S. antitrust class action, ends a case that began in 2005 when retailers sued Visa Inc. and MasterCard Inc., saying the credit card companies were fixing the fees they charged each time a shopper used a credit or debit card.

Visa and MasterCard were also accused of preventing retailers from steering customers to cheaper forms of payments.

U.S. District Court Judge John Gleeson approved the settlement in a written order. He also dismissed some of the objections that were made by retailers opposed to the deal, labeling them as ­hyperbole.

“The settlement secures both a significant damage award and meaningful injunctive relief for a class of merchants that would face a substantial likelihood of securing no relief at all if this case were to proceed,” Gleeson wrote.

The settlement, reached last year, is less than the originally proposed $7.2 billion retailers had sought. The lower amount came after thousands of merchants opted out of the deal because they thought it was inadequate.

“The settlement permanently ties the hands of thousands of businesses who wanted nothing to do with this misguided case, and a decision to approve it violates established law and common sense,” noted Mallory Duncan, general counsel at the National Retail Federation, which opposed the settlement.

He said the association would review Gleeson’s ruling and would likely file an appeal.

“We are very disappointed that this deeply flawed settlement has been approved,” he said. “It would do nothing to reduce swipe fees or keep them from rising in the future.”

Around 8,000 retailers, accounting for about a quarter of the transactional volume covered by the case, opted out of the settlement. Many of the retailers who opted out have filed their own lawsuits.

Those who opted out of the settlement say one of their main objections was a broad litigation release that forces all retailers who accepted Visa or MasterCard to give up their right to sue the credit card companies over rules at issue in this case or cases they may bring in the future.

While the settlement allows merchants to charge customers extra if they use Visa or MasterCard credit cards, critics of the deal note that those opportunities are limited and that some states prohibit such ­surcharging. They also say that retailers are unlikely to take advantage of surcharging for fear of upsetting consumers or losing them to competitors that do not impose a surcharge.

Proponents of the settlement, however, say it could result in consumers seeing lower prices for products depending on how they choose to pay.

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