A group of nine retailers asked a federal judge Friday to approve a multibillion dollar settlement of a lawsuit challenging the way banks and credit card networks set interchange fees.
The court filing kicks off a preliminary approval process that is expected to last roughly three months. During that time, merchants that oppose the proposed deal will have a chance to express their objections.
Under the proposed deal, announced in July, Visa Inc. and Mastercard Inc. and more than a dozen big banks agreed to pay nearly $7.5 billion to the suing merchants, who also won the right to impose a surcharge on credit-card purchases. The banks and card networks retained the authority to set credit card interchange fees, and they got a broad release from future lawsuits.
The retailers’ filing on Friday was hailed by representatives of the banking and payments industries, which are pushing for the proposed settlement’s approval.
"The settlement is a fair and reasonable negotiated compromise based on the facts and the parties’ legal positions,” Josh Floum, general counsel of Visa, Inc., said in a press release. “Now that the settlement has been filed, and the retailer plaintiffs have formally asked the court for approval, we are confident the court will approve the settlement as in the best interests of all parties.”
Nine of the 19 merchants and retail trade groups that were plaintiffs in the suit signed onto Friday’s filing, while 10 more did not. The National Retail Federation is among the merchant groups that opposes the legislation.
“Retailers would rather take their chances in court than accept this one-sided swindle written by the card industry for the card industry,” the National Retail Federation’s general counsel, Mallory Duncan, said in a press release. “The lawyers and handful of retailers who support the settlement do not represent the retail industry.”
Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a group that speaks for the lawsuit’s defendants, said the holdout merchants are trying to get Congress to pass legislation that would limit credit interchange fees, as it did in 2010 with debit interchange fees.
“These groups are simply hoping to create enough noise to attract Congress’s attention and extract even more money from the Hill,” Wexler said in a press release. “This represents the end of a long battle over fees between the retail and payment card industries.”
But Friday’s announcement merely begins a courtroom process that is expected to last well into next year.
If Judge John Gleeson does grant preliminary approval to the deal, individual merchants would then have the opportunity to express their objections. Twenty-five percent of all merchants nationwide would have to opt out in order to reach a threshold that would allow them to wriggle from the deal’s terms.
The retailers who filed Friday’s motion are: Photos Etc. Corp.; Traditions, Ltd.; Capital Audio Electronics, Inc.; CHS Inc.; Crystal Rock LLC; Discount Optics, Inc.; Leon’s Transmission Service, Inc.; Parkway Corp.; and Payless ShoeSource, Inc.