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A ruling by the U.S. Court of Appeals for the Second Circuit in New York striking down the 2012 settlement of a class action regarding Visa and MasterCard’s credit card swipe fees was met with hearty approval by the retail industry, including grocers.
“While NGA is still reviewing today’s decision … [we are] very pleased with this decision,” noted Peter J. Larkin, president and CEO of the National Grocers Association (NGA), in Arlington, Va. “NGA joined with numerous other merchants and trade associations that opposed the settlement because the class was improperly certified and the settlement was unreasonable and inadequate. Today’s decision confirms that."
Added Larkin: “When NGA joined the lawsuit over 11 years ago, it did so to bring about real reforms that included increased competition and transparency of the anticompetitive credit card swipe fee system. NGA opposed the settlement agreement because it failed in this regard by not enacting competition and transparency into the marketplace, allowing Visa and MasterCard to continue their anti-competitive practices. NGA will continue to fight to bring about true reforms to the marketplace.”
“RILA enthusiastically welcomes the circuit court’s decision to throw out this harmful settlement,” said Deborah White, EVP and general counsel of the Arlington-based Retail Industry Leaders Association, which, as a member of the class, formally opted out and objected to the settlement in 2014. “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. Today’s decision is a victory for all merchants and consumers.”
“This ‘settlement’ was never a settlement on behalf of the retail industry but rather a back-room deal that failed to represent the interests of retailers,” noted Mallory Duncan, SVP and general counsel for the Washington, D.C.-based National Retail Federation (NRF). “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. Now it’s time to seek real reform of these still-skyrocketing fees, whether it be in court or in Congress.”
Added Duncan: “This is not just a business-to-business dispute. These fees drive up the price of retail merchandise, costing the average family hundreds of dollars a year in added expenses.”
In 2014, the federation asked the appeals court to overturn the December 2013 approval of the settlement by U.S. District Court Judge John Gleeson, arguing that a broad cross-section of the retail industry were against the deal.
The settlement was of a 2005 lawsuit brought by 19 retailers and trade associations, but 10 of the plaintiffs, including all of the associations, rejected the settlement when it came in 2012. NRF wasn’t a plaintiff in the case, but argued against it because its class action status would have imposed its terms on thousands of NRF members.
“Numerous objectors and opt-out plaintiffs argue that this class action was improperly certified and that the settlement was unreasonable and inadequate,” the appeals court observed in the present ruling. “We conclude that the class plaintiffs were inadequately represented.”
Beyond swipe fees, grocers’ relations with the major credit card companies continue to be contentious, as illustrated by Kroger’s recent lawsuit against Visa regarding the use of personal identification numbers (PINs) to verify debit-card transactions.