Retailers Appeal Interchange Settlement
The National Retail Federation has filed its expected appeal of the court decision that locked in a settlement of long-standing retailer complaints about credit card interchange.
The association of retailers filed its notice of appeal with the U.S. District Court for the Eastern District of New York on Jan. 2.
The agreement the court approved came at the end of multi-year litigation over allegations that the major card brands’ credit card interchange system violated U.S. anti-trust law.
“NRF is filing the appeal to overturn the flawed credit card swipe fee settlement,” said the trade group's general counsel, Mallory Duncan. “The settlement does nothing to reform the price-fixing payments system that has let credit card swipe fees skyrocket over the past decade and nothing to keep them from continuing to soar in the future. Instead of lowering fees, the card industry's settlement proposes that merchants pass them along to consumers in the form of surcharges. That is absolutely the opposite of what retailers sought, and major retailers have soundly rejected surcharging.”
Duncan took particular issue with the retailers who participated in the settlement, arguing that they did not represent enough retailers.
“There's a settlement with nine individual retailers whose views are not representative of the collective industry,” Duncan argued. “A majority of the original plaintiffs in the case repudiated the settlement as soon as they saw its terms, the nation's largest retailers have spoken out against it, and close to 8,000 retailers and merchants have formally rejected the proposal. This is an abuse of the class action system and should never have been approved.
“The only people pleased with this settlement are Visa and MasterCard, because it means they can continue collecting tens of billions of dollars in hidden fees, the class action lawyers who stand to collect half a billion dollars in fees without fixing the problem, and a lower court, which has cleared a time-consuming case off its docket, but has done a serious disservice to merchants and the public in the process.”
The Electronic Payments Coalition also took a cool view of the appeal notice.
“After nearly a decade of negotiations, the court has determined that this settlement is in the best interest of all parties involved,” coalition spokesman Sam Fabens said in a statement. “This is simply a political ploy by a few big box retailers – for whom enough is never enough – that disregards the millions of retailers who are supportive of the settlement. These same tired arguments were raised over and over during the negotiations and would have been included in the final terms if they had any merit.”
The NRF also lashed out at the ABA, charging that bankers and other debit card issuers “aided and abetted” the interchange system for magnetic stripe cards rather than backing technologies the NRF said were less prone to fraud.
Kenneth Clayton, the ABA's chief counsel, said, “It doesn’t surprise us, on the heels of a big-box retailer breach that put 40 million consumer accounts at risk, that the retail lobby once again puts its pocketbook above the interests of consumers. Interchange, among other things, supports anti-breach efforts. Reduce interchange, and you may also reduce resources available to fight data breaches. Hard to see how that benefits anyone.”