ETA Insight: Judge Approves Credit Card Swipe Fee Settlement

Jason Oxman
December 16, 2013 –  On Friday afternoon, U.S. District Court Judge John Gleeson approved a negotiated settlement of an antitrust lawsuit that had been filed by a class of retailers against Visa and Mastercard and certain financial institutions.  The settlement approval brings an end to the case, although a party to the litigation may still file an appeal of the settlement decision.  For example, the merchants’ largest trade association had argued against the settlement and released a statement on Friday expressing disappointment in the settlement’s approval.

The settlement has several provisions that the court found will benefit merchants.  For example, in addition to monetary awards to retailers that negotiated and agreed to the entire settlement, retailers now have the ability to impose a surcharge on their customers that pay with a Mastercard or Visa credit card.

The case, In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, U.S. District Court for the Eastern District of New York, No. 05-1720, was filed in 2005.  Several prominent national retailers had opted out of the full settlement, although the court concluded in its order on Friday that the settlement was in the interest of retailers and would benefit competition.

The court found that the settlement was fairly negotiated and that ending the eight year old litigation would have benefits for all parties.  “I conclude that the proposed settlement secures both a significant damage award and meaningful injunctive relief for a class of merchants that would face a substantial likelihood of securing no relief at all if this case were to proceed,” Judge Gleeson wrote in his opinion.

Although ETA was not a party to this litigation, I think it’s good for all concerned to have this settlement behind us.  My view is that court cases are not the best way to ensure financial services companies and merchants alike can provide the safest, most reliable, most rewarding payments products to consumers.  Even Judge Gleeson noted his disappointment that this lawsuit had been “afflicted by needless hyperbole.” As the payments industry deploys innovative new electronic transactions services – and indeed, as merchants themselves innovate with new offerings for their customers – all of us working together to serve consumers will help us all grow together.

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