Swipe-Fee Settlement Now Heads Back to Judge

NEW YORK -- An eight-year legal battle over credit card swipe fees is nearing the home stretch. With today being the deadline to opt out and/or object to the proposed $7.25 billion swipe-fee settlement, convenience store retailers can now only wait and see what the judge will decide during a Sept. 12 fairness hearing on the deal.

"It is not clear exactly what will take place at the fairness hearing, but each side will at least get to present their arguments as to why they think the settlement should or should not be accepted," Doug Kantor, counsel for NACS, the Association for Convenience & Fuel Retailing, told CSNews Online.

He explained that the objecting plaintiffs, including NACS, are submitting a brief today laying out those arguments in detail. That brief will be part of the arguments that will go in front of U.S. District Judge John Gleeson in September.

The settlement, which received preliminary approval in November, would bring to a close a 2005 class-action lawsuit brought by retailers against Visa, MasterCard and other financial institutions over credit card swipe fees. The proposed accord between the two sides was reached in July.

In total, 19 associations and individual retailers were party to the 2005 class-action lawsuit. The case is currently before Gleeson presiding in the Eastern District of New York in Brooklyn, N.Y. It is unknown if Gleeson will make a final decision on the settlement at the Sept. 12 hearing.

What to Watch For

Approximately 8 million merchants had until today to opt out and/or object to the deal. Every business that has accepted a Visa or MasterCard credit or debit card for payment since Jan. 1, 2004 is a member of the class of plaintiffs in this antitrust case. Merchants not opting out will be considered part of a class that accepts the deal.

As for the final tally of retailers and industry associations who opted out or objected to the deal, Kantor said it will take a few days before a report on those numbers is presented to the court. However, he added that "it is clear there is a lot of dissatisfaction" with the proposal currently on the table.

"The thing to watch over the next couple of days is how significant some of those objections and opt-outs are [and] what types of entities weigh in -- I think there will be some newsworthy ones -- but we will have to wait and see," Kantor said.

He noted that it is unlikely the proposed settlement will be revised between now and September.

"I do not expect, at this stage, for the settlement to be revised," the attorney said. "There could be something very small. But because these things all interrelate in the agreement, it is hard to do that. And, in truth, it will either rise or fall as one."

Opting Out

Visa, MasterCard and several banks have filed suit against certain retailers and associations who opted out of the deal. In their complaint, filed late last week in federal court in Brooklyn, N.Y., they said the legal action was "necessary to prevent the continuation of endless, wasteful litigation."

Parties targeted by the suit include NACS, the National Grocers Association, National Restaurant Association, Affiliated Foods Midwest Cooperative, and D'Agostino Supermarkets Inc. All of them were part of the litigation that led to the proposed settlement and are now are "among the most vocal opponents" of the deal, according to the complaint.

Visa, MasterCard and the banks seek to bar these trade groups and retailers from seeking antitrust damages for the fee practices, according to Bloomberg.com.

However, according to Kantor, the move is "unusual and it's not likely to go anywhere."

Additional convenience store companies that have objected and opted out of the settlement include 7-Eleven Inc., Circle K Stores Inc., Alon Brands Inc., Cumberland Farms Inc., Kwik Trip Inc. and Wawa Inc. Other major retailers include Wal-Mart Stores Inc., Costco Wholesale Corp. and Starbucks Corp.

"What is clearly striking about the opposition to this settlement is the diversity of merchants that have come out against the deal. They are from every corner of the country, from different merchant verticals, and are different sizes. But they share a common view: that this deal is not a good one for the industry," said Kyle McKeen, president and CEO of Alon Brands.

"In our market segment of convenience stores and petroleum sales, 76 percent of the stores are owned and operated by single-store operators that don't stand a chance arguing against restrictive rules and regulations that the big credit card companies impose on them," McKeen continued. "Allowing this settlement to move forward would validate and continue the oppressive environment that small businesses have to face with the big card companies."

For more information on the settlement, go to www.paymentcardsettlement.com.