Appeals court overturns Visa/Mastercard swipe fee settlement, earning industry praise

Retail and pharmacy organizations are welcoming a ruling made recently striking down the 2012 settlement of a class action lawsuit over Visa and MasterCard’s credit card swipe fees.

 

The U.S. Court of Appeals for the Second Circuit in New York on Thursday overturned a December 2013 approval of the settlement by U.S. District Court Judge John Gleeson. The settlement came in a 2005 lawsuit brought by 19 retailers and trade associations but 10 of the plaintiffs, including all of the associations, rejected the settlement when it was unveiled in 2012. Among the organizations that were plaintiffs is the National Community Pharmacists Association, which praised the ruling. 

 

“NCPA joined this lawsuit to achieve meaningful, long-term reforms to the current swipe fee system. This proposed settlement came woefully short and NCPA commends the court’s decision to nullify it,” NCPA CEO B. Douglas Hoey said. “The proposed settlement did not impose necessary fundamental changes to the structure of the industry and the rules affecting merchants, particularly small business community pharmacies.”

 

The Retail Industry Leaders Association (RILA)  opeted out and objected to the settlement in 2014 and welcomed it being overturned. 

 

"RILA enthusiastically welcomes the circuit court's decision to throw out this harmful settlement," EVP and general counsel Deborah White said. “Quite simply, 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 with impunity. Today's decision is a victory for all merchants and consumers.”

 

The National Retail Federation (NRF), another organization that wasn’t party to the lawsuit, but appealed the ruling in 2014 on behalf of many of its members said that under the settlement small retailers would have seen as little as a few hundred dollars under the settlement. Retailers who rejected the monetary settlement would have still been bound by other restrictions the court would not let them opt out of, including a prohibition on future lawsuits over the fees.

 

Data cited by the NRF shows that credit card swipe fees average about 2% of each transaction and amounted to about $30 billion a year at the time of the settlement.