National Retail Federation Joins Opposition to Credit Card Fee Settlement

As we reported back in August, opposition has been growing to the July 13th settlement of a federal anti-trust lawsuit over credit card interchange (“swipe”) fees. Under terms of the agreement (still subject to court approval), Visa and MasterCard – along with banks such as JPMorgan Chase, Bank of America, Citibank, Wells Fargo and Capital One – would have to pay as much as $7.25 billion in cash and reduced swipe fees for a period.

At the time of our earlier article Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), the National Association of Convenience Stores and the National Grocers Association were some of the big names voicing opposition.

Now the National Retail Federation (NRF) has announced that its Board of Directors has authorized the Federation to go to court to block the settlement. As the NRF is “the world’s largest retail trade association”, its opposition will certainly add visibility and potentially a lot of clout to the cause.

However, at this point the fate of the settlement is in the hands of a federal judge. Reports are that the plaintiffs (who are U.S.-based retailers) plan to file for preliminary approval of the settlement by October 12. The judge has not fully indicated how, or if, outside parties can involve themselves in the case.

In the Federation’s press release, NRF President and CEO Matthew Shay offered a quote that pretty well summarizes most opponents’ objections to the settlement: “It does nothing to curb the anticompetitive behavior of Visa and MasterCard, and instead ensures that swipe fees paid by retailers and their customers will continue to rise while barring any future legal challenges. The proposal is a lose-lose-lose for merchants, consumers and competition. NRF will take any and all steps necessary to oppose the settlement as it is currently proposed and will work toward real reform of the swipe fee system.”

Later in the press release, as the organization’s objections to the settlement were detailed, it was emphasized that the “NRF is particularly concerned by a provision barring all merchants – including those that do not yet exist – from ever again suing Visa and MasterCard over swipe fees.”

With the NRF formally joining the opposition to the settlement, it is becoming increasingly interesting to see how this will play out.

In the end, it could be as simple as the judge determining that all requirements have been met for a valid settlement, granting the preliminary approval and refusing to allow outside groups to intervene. On the other hand, it’s hard to see how the judge could simply ignore the opposition of major retailers like Wal-Mart and major groups like the NRF in a landmark anti-trust case that affects everyone, including merchants not yet in existence, who accepts credit cards in the U.S.

Also the NRF in its announcement noted that they are “the only trade association representing the full range of merchants who could be included in a class action”, which appears to be a not-so-subtle hint that a class action lawsuit is under consideration. And given the resources of the companies and organizations that oppose the settlement, one would think it likely that other legal or political avenues are being explored.

So the future course of this saga could range from a quick ending with a dry pronouncement by a judge next month, to a major brawl involving some of the major players in retail.

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