Large merchants are re-energized in their conflict with Visa and Mastercard on the issue of swipe-fee costs, following the U.S. Supreme Court’s refusal to reinstate a class-action settlement that deeply divided many of the plaintiffs.

The Supreme Court today declined to restore a $7.25 billion settlement reached five years ago between the two largest card networks and millions of merchants, putting the case—originally filed in 2005—back on track for a possible trial after a federal appeals court overturned the settlement last year.

Observers weren’t entirely surprised, given that millions of merchants opted out of the settlement, claiming it would prevent future legal action on swipe fees.

A credit card being swiped at a store terminal
Adobe Stock

“Goliath merchants are empowered [by the Supreme Court’s move],” said Eric Grover, a payments analyst with Intrepid Ventures. “The large merchants want curbs on credit interchange and network fees and rules with teeth.”

Advocates for merchants say the court's decision gives them a fresh shot to attack the issues surrounding credit and debit card interchange, which they say cost retailers billions of dollars annually in fees to banks.

“The vast majority of merchants were unhappy with the settlement, which consisted of hollow victories including monetary damages that weren’t significant enough to compensate for damages done, and precluded future legal action on practices merchants object to,” said Mark Horwedel, CEO of the Merchant Advisory Group, which includes hundreds of retailers.

Some merchants wanted to accept the settlement.

But the retail industry's largest trade group applauded the Supreme Court's move.

“If this settlement had been approved, the structure of fees that drive up the prices of everything consumers buy would have been cemented into place forever,” said Mallory Duncan, senior vice president and general counsel of the National Retail Federation.

Retail industry lawyers think merchants could win the case if it goes to trial.

“This is still a good case and it’s one merchants can win if their advocates see it all the way to the finish,” said Douglas Kantor, a partner with Steptoe & Johnson LLP, who has represented merchants in interchange litigation.

The card networks also appear unfazed in their commitment to defend the financial services industry's practices, having previously argued that interchange, which amounts to about 2% of the transaction cost and is meant to fund fraud protection, is vital to support a strong payment system.

“We will continue to work with all parties to ensure a proper resolution of this matter as it moves forward in the Eastern District,” said a Mastercard spokesperson.

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