Retailers Reviewing Credit Card Settlement Terms

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Retailers Reviewing Credit Card Settlement Terms


The settlement of a lawsuit, In Re Payment Card and Merchant Discount Antitrust Litigation, that could result in a $7.25 billion payment to about 7 million retailers across the country by Visa, MasterCard and other large banks, temporarily lower swipe fees and clear the way for merchants to charge more for credit card transactions, drew a measured response from industry groups that were party to the more than 7-year-old suit, with most organizations explaining that they would have to examine the agreement.

“We took this action on behalf of independent retail grocers to seek fundamental restructuring and reform of anti-competitive credit card interchange fees and payment rules,” noted Peter Larkin, president and CEO of the Arlington, Va.-based National Grocers Association (NGA). “While we have knowledge of the framework of the settlement, we have not seen the final language or had a chance to assess its impact on our members. With the announced filing of the settlement agreement, NGA staff and our executive committee and board of directors will now begin a thorough review process of the settlement agreement to determine whether or not the association will be in support."

The National Community Pharmacists Association (NCPA) “joined this lawsuit to achieve long-term reform of the credit card interchange fee system,” said the organization’s CEO, B. Douglas Hoey. “The current system is inherently unfair to community pharmacy small-business owners and saddles all consumers with higher costs. NCPA’s board and legal counsel are actively evaluating this complex and multifaceted proposed settlement to determine whether it is in the best interest of the independent community pharmacy owners we represent. No decision will be made with respect to the acceptability of this proposed settlement until a closer analysis of the final language has been completed.”

“What we need are changes in the rules that bring about transparency and competition that would be here for years to come,” observed Mallory Duncan, general counsel to the Washington, D.C.-based National Retail Federation, which was not involved in the suit.

Among supermarket retailers, Cincinnati-based Kroger expressed its overall approval of the settlement, as with it, "merchants have, for the first time, some leverage through pricing," said Keith Dailey, director of external corporate communications.

"Everyone seems to be focused on the surcharge, but the discounting aspect of the settlement is another very powerful new tool at merchants’ disposal, especially for use with electronic payments," Dailey told Progressive Grocer. "Retailers can now consider discounting for customers who use debit or certain lower-cost credit cards as well. Through discounted pricing on electronic payments, we can inform customers and encourage consumers to use more efficient and lower-cost products. That benefits our customers and is good for our shareholders."

Dailey said the settlement "represents the best opportunity to resolve the litigation and, if we don’t take advantage of it now, we’ll continue indefinitely in the current anticompetitive environment. This is a good settlement, not a perfect one, and it gives any merchant, large or small, new opportunities to take advantage of on behalf of their customers."

 While plaintiffs and other retailers have been somewhat guarded in their responses, the attorneys who worked on the case, which was filed in 2005, hailed the settlement as a significant victory for merchants and consumers.

"The reforms achieved by this case and this settlement will help shift the competitive balance from one formerly dominated by the banks, which controlled the card networks, to the side of merchants and consumers," noted K. Craig Wildfang, who led the case for the class plaintiffs as co-lead counsel and partner at Minneapolis-based Robins, Kaplan, Miller & Ceresi LLP, on of three co-lead counsel law firms on the case, along with Berger & Montague PC and Robbins Geller Rudman & Dowd LLP. "Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to merchants, which in turn will result in lower prices for all consumers."

"These reforms go a long way to achieving price transparency for the most heavily used form of payment in the United States, which will benefit consumers," added Martin R. Lueck, chairman of the executive board at the law firm.

The suit’s plaintiffs included Affiliated Foods Midwest Cooperative Inc., Coborn’s Inc., D’Agostino Supermarkets, the National Association of Convenience Stores and the National Cooperative Grocers Association. The settlement is believed to be the largest ever of a private antitrust suit under the Sherman Act.