Yesterday, in a major victory for the retail industry, a three-judge panel of the United States Court of Appeals for the Second Circuit unanimously overturned the class-action settlement between Visa, MasterCard, the largest card-issuing banks and millions of retailers. The court ruled that retailers were inadequately represented in the settlement.
NACS CEO Henry Armour said, “We are pleased that the Second Circuit Court of Appeals has thoughtfully addressed the problems we have long identified with this proposed settlement. We will work to help ensure that this moves forward in a way that recognizes the best interests of merchants and the consumers they serve.”
The proposed $7.25 billion settlement, struck in 2012, was the largest antitrust settlement in U.S. history. The case challenged the way that swipe fees are set by Visa, MasterCard and their banks, as well as the rules that govern how cards are accepted.
NACS led the efforts to opt out of and object to the proposed settlement because it failed to reform the system of swipe fees.
The court determined that the interests of members of the class, who were seeking changes to Visa’s and MasterCard’s rules, were sacrificed in favor of a cash payment. That is just what NACS and other objectors argued to the court was unfair. The settlement also included an overly broad release of future legal claims against the defendants that not only disadvantaged current merchants but would impair the legal rights of all future merchants in the United States–even those whose businesses have not yet been created. In his concurring opinion, Judge Leval wrote, “This is not a settlement, it is a confiscation.”
The court also invalidated the class that was certified in the case for purposes of the settlement. The case is being sent back to the U.S. District Court to determine next steps, though it is also possible that Visa, MasterCard or other defendants might appeal the decision. District Judge Brodie plans to hold a conference with attorneys reviewing the status of the case on August 11.
at the fairness hearing regarding the settlement, hank told the court "this proposed settlement is so bad, merchants would be better off losing the case in Court than accepting it.The ruling vindicates NACS’ long-held position that the settlement was unfair. In fact at the fairness hearing regarding the settlement, Armour had told the court: "This proposed settlement is so bad, merchants would be better off losing the case in court than accepting it."
The case may now present the potential for real changes to the system of credit and debit card swipe fees. NACS will continue to keep its members informed regarding developments in the case.