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NEW YORK — An appeals court ruling has struck down the 2012 settlement of a class-action lawsuit over credit card swipe fees imposed by Visa and MasterCard. The settlement had been opposed by a significant portion of the retail industry.
The case originated in a 2005 lawsuit filed by 19 retailers and trade associations against Visa, MasterCard and the banks that issue their cards. The suit contended that the card companies and banks overcharged retailers on interchange, or “swipe” fees when customers used credit or debit cards. The fees cost retailers approximately $30 billion annually.
A $7.25 billion settlement — the largest all-cash antitrust settlement in United States history — was reached in 2012 but was rejected by 10 of the plaintiffs, including all participating trade groups, on the grounds that it failed to address the anticompetitive practices of the credit card companies and denied retailers their right to challenge those practices in court ever again. In the settlement, the credit card companies proposed that the swipe fees be passed along to consumers as a surcharge, a proposal rejected by major retailers.
“Quite simply, the settlement orchestrated by the card networks and banks would have undermined merchants’ legal rights forever and would have allowed Visa and MasterCard to impose higher and higher swipe fees with impunity,” said Deborah White, executive vice president and general counsel for the Retail Industry Leaders Association.
In its ruling, the U.S. Second Court of Appeals declared that the settlement was “unreasonable and inadequate,” ruling it unfair to retailers who would receive no payments and little or no benefit. It also decertified the case as a class action.
“This ‘settlement’ was never a settlement on behalf of the retail industry but rather a backroom deal that failed to represent the interests of retailers,” says National Retail Federation senior vice president and general counsel Mallory Duncan. “It would have given merchants pennies on the dollar for the price fixing they have suffered at the hands of the big credit card companies and would have done nothing to end price fixing or to lower swipe fees going forward.”
