Retailers to Appeal Preliminary Ruling in Proposed Interchange Settlement

On December 3, a majority of named class plaintiffs filed a notice of appeal to challenge a ruling from the U.S. District Court for the Eastern District of New York that grants preliminary approval to a proposed settlement of a long-standing antitrust class action filed by merchants against Visa, MasterCard, and the largest banks. The group will ask the U.S. Court of Appeals for the Second Circuit to deny preliminary approval due to the legal defects in the proposed settlement.

On November 9, U.S. District Court Judge John Gleeson granted preliminary approval [1] to the proposed class-action settlement of the federal antitrust lawsuit over rapidly rising Visa and MasterCard credit card swipe fees. The decision to grant preliminary approval came after hearing oral arguments from both opponents and proponents of the settlement. Opponents plan to appeal the judge’s ruling.

Ten of the original 19 named class plaintiffs oppose the settlement. In addition, three associations — the American Booksellers Association, the National Association of College Stores, and the National Retail Federation — and 17 retail and restaurant companies filed a brief in opposition to the settlement.

More than 1,200 merchants have weighed in with the courts in opposition to the settlement, arguing that it locks in the broken interchange system, deprives merchants of their right to fight what they contend are anticompetitive practices of Visa and MasterCard in court, and constrains innovations, such as mobile technology, that could bring competition to the marketplace.

“This settlement has fatal legal defects and should not get preliminary approval.  We look forward to presenting the problems we see in this proposal to the Second Circuit Court of Appeals.,” said Jeffrey Shinder, managing partner, Constantine Cannon, LLC, counsel to the merchants objecting to the proposed settlement, in a statement. “The merchant community is deeply committed to reforms that bring transparency and competition to the broken electronic payments market. The volume and diversity of those objecting to this flawed proposal is remarkable and continues to grow.”

The named class plaintiffs opposing the proposed settlement include Affiliated Foods Midwest; Coborn’s, Inc.; D’Agostino Supermarkets; Jetro Holdings, Inc. and Jetro Cash & Carry Enterprises; the National Association of Convenience Stores; NATSO (which represents truck stops and travel plazas); the National Community Pharmacists Association; the National Cooperative Grocers Association; the National Grocers Association; and the National Restaurant Association.