Merchants score victory over Visa and MasterCard as court tosses $7.25bn interchange settlement
30 June 2016 | 8986 views | 1
In a win for merchants, a US federal appeals court has killed off a $7.25 billion class action settlement over interchange fees between millions of retailers and Visa and MasterCard.
The huge settlement over claims that the card schemes had improperly fixed credit and debit card swipe fees was agreed by law firms acting on behalf of class action plaintiffs in 2012, as Visa and MasterCard sought to put a long-running saga to bed.
However, the deal was soon rejected by a host of top retailers and trade groups, who counter-sued the card schemes in search of heftier fines and deeper reforms. Nearly 8000 merchants opted out, bringing the settlement down to $5.7 billion.
Now the 2nd US Circuit Court of Appeals in New York has unanimously struck down the settlement, with Judge Pierre Leval saying: "This is not a settlement; it is a confiscation."
The court ruled that a provision in the settlement stopping merchants from suing over fees was unfair and also criticised lawyers that represented the retailers for not doing enough to protect their interests, says Bloomberg.
The settlement could now be renegotiated or the case could go to trial. Visa and MasterCard have both said that they will review the decision.
Deborah White, EVP, Retail Industry Leaders Association, says: "Today’s decision is a victory for all merchants and consumers. The settlement orchestrated by the card networks and banks would have undermined merchants’ legal rights forever and would have allowed Visa and MasterCard to impose higher and higher swipe fees."