The U.S. Supreme Court has turned down an appeal by big banks and retailers to revive a $7.25 billion class action antitrust settlement with Visa and MasterCard over interchange fees. This leaves in place a Second Circuit Court of Appeals ruling determining that the settlement did not adequately represent the interests of some of the merchants who are members of the class. In June, the Second Circuit overturned the settlement, concluding that the class counsel and representatives didn’t adequately stand for merchants who would accept Visa and MasterCard credit cards in the future. The Second Circuit, though, took issue with having the same counsel negotiating for both classes, saying that the rule changes would have little value to some merchants, like those in New York, who are banned by state law from surcharging consumers.
The settlement, reached in 2012, attempted to resolve claims that Visa and MasterCard had maintained a series of network rules that enabled the companies to charge merchants higher transaction fees than the retailers would have tolerated in a competitive market. The settlement offered up to $7.25 billion in compensation for merchants who accepted Visa or MasterCard from January 2004 to November 2012. For merchants that would accept the cards after Nov. 28, 2012, the settlement promised some changes in Visa and MasterCard rules, including allowing retailers to charge customers more for paying with those credit cards. However, the Second Circuit said the rule changes would have little value to some merchants like New York retailers, which are banned by state law from surcharging. The appeals court also objected to the fees for class counsel, which were calculated based solely on the value of the settlement fund.
In November, retailers who stood by the settlement asked the Supreme Court for review, saying there was no guarantee the objectors could get a better deal settlement. The petition further argued that the Second Circuit’s refusal to let the same counsel represent injunctive and damages classes that do not perfectly align would offer little benefit and substantial difficulties in the future.
Big banks including Citigroup Inc., Bank of America NA, Barclays Bank PLC, Capital One Bank NA, HSBC Financial Corp. and JPMorgan Chase & Co., along with Visa and Mastercard, backed the petition for review by the high court. The National Retail Federation, a trade group that opposed the settlement, said it welcomed the Supreme Court’s decision. “Retailers were skeptical of this settlement from the beginning,” NRF vice president and general counsel Mallory Duncan said in a statement. “It would have done nothing to keep swipe fees from rising in the future.” For consumers, it is unclear what this denial will mean. The inability for retailers to surcharge consumers is certainly a good thing, but businesses should not be forced by MasterCard and Visa to pay higher prices to process these transactions either. In any case, the litigation now goes back to the drawing board, so to speak, and the parties will again attempt to negotiate a settlement that will better compensate all class members.