A hearing on the proposed $7.2 billion settlement between merchants and credit card companies has been set for November 9.


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Inside This Issue - News

Credit card settlement draws fire

November 5th, 2012

NEW YORK – A hearing on the proposed $7.2 billion settlement between merchants and credit card companies has been set for November 9.

Retailers and others opposed to the settlement had until October 31 to file their written objections. That is less time than many expected, but a number of retail trade organizations were quick to make their views on the matter known.

“The proposal is unacceptable in every way and we look forward to making our case to the courts that this one-sided deal should be rejected,” said Retail Industry Leaders Association president Sandy Kennedy. “The outrage within the retail community over this flawed proposal and the harm that it will cause cannot be understated.”

Kennedy said that the proposed class-action settlement would preserve a “broken” system of interchange fees for debit and credit card transactions, and would also deny retailers the right to sue card issuers or banks on the issue in the future.

The National Retail Federation (NRF) also opposes the revised settlement proposal, which was filed in U.S. District Court in Brooklyn, N.Y., on October 19.

“The settlement still does virtually nothing to protect retailers or their customers from the abuses of the card industry, and it attempts to silence any objections for years to come,” said NRF senior vice president and general counsel Mallory Duncan. “Retailers would rather take their chances in court than accept this one-sided swindle written by the card industry for the card industry.”

Duncan added that the majority of the plaintiffs in the case have repudiated the settlement, including six national trade associations representing thousands of merchants. “The lawyers and handful of retailers who support the settlement do not represent the retail industry,” she said.

The National Community Pharmacists Association (NCPA) is also opposed.

“This proposed settlement not only enables continued centralized price fixing by Visa and MasterCard, but it prevents all current and future merchants from challenging actions in the future,” says NCPA chief executive officer Douglas Hoey.

The proposed settlement, which was announced this summer, is meant to end a seven-year legal battle. Thirteen individual retailers and six trade associations filed suit against Visa and Mastercard in 2005. At issue were the swipe fees merchants have to pay every time a Visa or Mastercard credit or debit card is swiped at one of their stores.

The plaintiffs charged that those fees were kept unreasonably high by a cartel-like arrangement between the card companies and the banks.

The NRF says credit card swipe fees average about 2% of each transaction, amounting to about $30 billion a year.

The credit card companies have agreed to settle the case by offering to pay $6.05 billion to up to 8 million merchants. Visa and MasterCard would also temporarily reduce swipe fees by an amount equal to $1.2 billion. Finally, retailers for the first time would be allowed to impose surcharges on those customers who pay with credit or debit cards, a practice Visa and MasterCard have never allowed in the past.

If approved over the objections of retailers, it would be the largest federal antitrust settlement in U.S. history.

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