Following the lead of other retailers, the National Retail Federation filed an appeal Jan. 2 of a U.S. District Court ruling to approve the years-long class action against the card brands that resulted in a $5.7 billion swipe-fee settlement.
The NRF's appeal comes less than a month after Home Depot Inc. and the Constantine Cannon LLC law firm, representing the National Association of Convenience Stores and other retailers, started the appeal process by filing Dec. 13, only hours after the settlement was approved by Judge John Gleeson.
The NRF filed with the 2nd U.S. Circuit Court of Appeals, asking that the lower court ruling be overturned. Retailers who opposed the swipe-fee settlement have argued against a stipulation that those who accept settlement payments waive their right to sue the card brands over fees in the future.
"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," NRF senior vice president and general counsel Mallory Duncan says in an NRF-issued statement.
In addition, retailers have claimed that the caveat that card brands lift merchant surcharging restrictions is not beneficial, as charging consumers a fee to use credit cards could be detrimental to their businesses. "That is absolutely the opposite of what retailers sought, and major retailers have soundly rejected surcharging," Duncan says.
Some of the biggest names in retail are among the more than 50 retailers who have filed or joined appeals of the ruling. Among those are Wal-Mart Stores Inc., Target Corp., Starbucks Corp., Macy's Inc., J.C. Penney Corp., Kohl's Corp., Costco Wholesale Corp., Crate & Barrel Holdings, Dick's Sporting Goods Inc., 7-Eleven Inc., Amazon.com Inc., Lowe's Companies Inc., and Marathon Petroleum Co. and TJX Cos. Inc.
"A majority of the original plaintiffs in the case repudiated the settlement as soon as they saw its terms, the nations largest retailers have spoken out against it, and close to 8,000 retailers and merchants have formally rejected the proposal," Duncan says, referring to the option merchants had prior to the final ruling to either accept or opt out of the settlement.
Neither Visa nor MasterCard responded to inquiries about the appeals by deadline.
However, the Electronic Payments Coalition, which often expresses the card brands' stance on interchange issues, continues to support the judge's settlement ruling.
"After nearly a decade of negotiations, the court has determined that this settlement is in the best interest of all parties involved," says coalition spokesman Sam Fabens.
The appeals being filed disregard the millions of retailers who are supportive of the settlement, Fabens adds. "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 represents about 10,000 members, says Stephen E. Schatz, senior director of media relations for the federation. The foundation includes "retailers of all shapes and sizes from one-store operators to multinational merchants," Schatz adds. "We also represent online retailers, chain restaurants and others."
The NRF cannot disclose the names of member retailers involved in the litigation, Schatz says.
The circuit court docket shows that Discover Financial Services also filed an appeal to the settlement on Dec. 19, following up on its previous objections that Judge Gleeson disregarded during hearings prior to his settlement decision. Essentially, as a company that accepts card payments, Discover contends it could be harmed by the protection against future litigation that the settlement provides for Visa and MasterCard. In the same vein, Discover objects to any situation in which it feels it would unjustly be unable to compete on interchange pricing.
Discover did not provide comment about its appeal prior to deadline.
Retailers are also watching closely as the Federal Reserve Board responds to a separate court ruling regarding the debit transaction fee caps it put in place under the Durbin amendment of the Dodd-Frank Act.
In his July 31 ruling, Leon questioned whether the Fed took into account what Congress intended in establishing the fee cap at 21 cents. The judge also questioned whether providing merchants the choice of only two payment networks for debit transaction routing followed the spirit of the law. Many in the industry said merchants should have a choice between two PIN and two signature debit networks on each transaction.
The Federal Reserve Board filed an appeal on Dec. 4 to this ruling, saying it followed proper procedure for both setting the fee cap and network option requirement.