Retailers Officially File Swipe Fee Deal Appeal

WASHINGTON, D.C. -- The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) were in court Monday asking an appeals court to overturn the credit card swipe fee settlement with Visa Inc. and MasterCard Inc.

The two groups argued that a federal judge approved the deal after it was negotiated by only a handful of merchants. In addition, they claim the settlement fails to bring the fees under control.

"The truth is there is no settlement with the retail industry, only an agreement with a handful of merchants who do not represent the industry as a whole," said NRF Senior Vice President and General Counsel Mallory Duncan. "Given that the judge knew this backroom deal was opposed by a broad range of small and large retailers alike and allows these fees to continue to skyrocket, it clearly should never have been approved. This is a serious mistake the appellate court needs to correct."

On Dec. 12, U.S. District Judge John Gleeson gave final approval to the $5.7-billion settlement, bringing to a close a class-action lawsuit that alleged Visa Inc. and MasterCard Inc. illegally fixed credit card interchange swipe fees, as CSNews Online previously reported.

In turn, both retailer organizations filed notices of appeal with the 2nd U.S. Circuit Court of Appeals in New York earlier this year, and followed up Monday with a joint brief before the court.

"The retail community remains fully committed to fighting this flawed settlement and addressing the fundamental lack of competition in the electronic payments market," RILA Executive Vice President and General Counsel Deborah White said. "Quite simply, the proposed settlement not only undermines merchants' legal rights and fails to restrain Visa and MasterCard's ability to increase swipe fees with impunity, but it also has broad implications on the rights of others in future meritorious class-action cases."

In its brief to the court, the groups called approval of the mandatory settlement of such "breathtaking scope in the face of widespread and substantive objection" unprecedented.

"A broad cross-section of the American retail industry numbering thousands of businesses from iconic national department store chains and general merchandise chains to apparel outlets, specialty shops, restaurants and one-location Main Street stores thoughtfully analyzed the settlement and concluded that it offers them no benefit," the brief stated. "While a settlement this skewed was bound to be unpopular, the extent of dissatisfaction within the retail industry has been extraordinary."

Many retailers and retail organizations rejected the settlement, in part, because instead of lowering fees, the credit card companies proposed retailers pass along to the fees to consumers as a surcharge. Major retailers rejected the surcharge proposal, saying it was the opposite of what they had sought.

The lawsuit -- which was brought by 19 retailers and trade associations -- dates back to 2005 and the settlement was first proposed in July 2012. However, 10 of the plaintiffs, including all of the associations, rejected the settlement. Neither NRF nor RILA was a plaintiff in the case, but both have argued against it because the class-action status would impose the settlement terms on thousands of their members.

The brief also cited a number of legal errors in the decision, including failure to adequately balance the monetary relief against the requirement to give up future legal claims; dismissing "substantive and thoughtful" opposition; and ignoring a court-appointed expert's opinion that the proposal for surcharging was of "uncertain" value that would "have only a small impact" on swipe fees, according to the groups.