Court Grants Preliminary Approval to Interchange Deal
Judge John Gleeson of the U.S. District Court for the Eastern District of New York took the penultimate step to ending a years long case over credit card interchange on Friday when he granted preliminary approval of the agreement between retailers, payment networks and nine major card issuers over merchant interchange fees.
The proposed settlement was originally announced to almost immediate controversy on July 13, after several years of litigation.
"We view Judge Gleeson’s ruling today as further indication that this historic settlement is a fair and balanced resolution to the epic swipe fee battle,” said Trish Wexler, spokeswoman for the Electronic Payments Coalition, a payment industry trade group organized around interchange and which includes credit unions.
“After seven years of negotiation, two years of mediation, and compromise by both sides, the judicial process continues to work effectively and we have taken another important step toward settling this dispute between retailers and the payment card industry,” Wexler said.
The EPC said the preliminary approval will almost immediately give retailers the many benefits they demanded and 60 days from now, the card networks will implement rule changes. Merchants will now have the ability to add checkout fees (a retailer surcharge) at the register and form buying groups.
Retail groups, some of whom had been parties to the case and the negotiations that led to the settlement had filed objections to the possible approval, but Gleeson rejected those, which led the EPC to express vindication.
“Let’s be clear – the objections from retailer lobbying groups are largely politically motivated, in hopes of influencing Congress to give them even more political handouts,” said Wexler. “Regardless, we remain entirely confident that the settlement will ultimately be approved – it is time to put an end to this epic battle.”
Gleeson still has to grant final approval to the deal and the retail groups can continue to object or can appeal the settlement.
The National Retail Federation said in a release in which it said it will explore all legal options following the court's decision. “We respectfully disagree with the court’s assessment of the proposed settlement,” NRF Senior Vice President and General Counsel Mallory Duncan said. “We do not believe the proposal meets the legal tests required to meet even preliminary approval. Retailers, their customers and competition would suffer irreparable harm if this one-sided deal is allowed to move forward. We will consult with our attorneys and act as soon as possible to correct this injustice.
“This proposal benefits no one but lawyers and credit card companies, and should not be forced on the retail industry or retailers’ customers,” Duncan said. “It’s a morass of legal flaws, and rather than bringing about reform it would only entrench the anticompetitive behavior of the card companies while putting them beyond the reach of the law.”