A major trade group, the National Retail Federation, objected Friday to a landmark litigation settlement some merchants reached with the card networks Visa and Mastercard last month over past overcharges.
The NRF, which represents thousands of U.S. retailers, told the judge overseeing a long-running class action that the settlement reducing fees charged by bank card issuers and the networks falls short of needed remediation. “Financial relief offered by the proposed settlement is meager and temporary,” the NRF contended in the April 26 letter to U.S. Chief District Judge Margo Brodie.
As part of the settlement, Visa and Mastercard would lower the fees they charge merchants for credit card transactions and cap those charges for a period of five years. The pact, which is still subject to court approval, would also revise the networks’ rules with regard to transactions and surcharges.
The two card network giants have been battling the merchants in court for nearly two decades, fighting billions of dollars in claims that they overcharged merchants when consumers swiped their credit cards to pay for products and services. Some of the biggest retailers in the U.S. have been involved in the litigation, including Home Depot and 7-Eleven as well as merchants such as Starbucks, but not all of their lawyers supported the settlement.
In a press release highlighting the letter to Brodie, NRF Chief Administrative Officer and General Counsel Stephanie Martz called the settlement a “backroom deal” struck without input from major retailers and their associations. NRF, along with the major retailer Walmart and another trade group, were given permission in 2021 to intervene in the case.
The NRF argued that the proposed temporary rate reduction would only save merchants $6 billion annually, on average, compared to the $100 billion in credit card swipe fees collected by Visa and Mastercard last year.
The settlement is expected to provide at least $29.79 billion in savings over five years to merchants as a result of the lowered fees and temporary cap, according to lawyers representing the plaintiffs.
NRF also cast doubt on the appropriateness of the settlement following a courtroom loss for the credit card company defendants “when the case is on the (relative) eve of trial after years of litigation.”
“To cram down a settlement with minimal relief after the Defendants’ recent summary judgment defeat is deeply unfair,” the NRF explained in the letter.
The settlement pertains to all merchants who accepted Visa and Mastercard debit or credit cards since December 18, 2020 though it stems from a 2005 lawsuit brought by the merchants. The injunctive relief obtained here follows on a $5.54 billion settlement for all merchant class members approved by the Second Circuit Court of Appeals in March 2023, according to a March 26 press release from law firms that brokered the agreement.
The NRF is part of a coalition that has also been pushing Congress to pass a bill that would enact the Credit Card Competition Act, requiring bank card issuers to offer competing card networks as alternatives to Visa and Mastercard for the processing of credit card transactions. The bipartisan-backed bill has seemingly stalled for the moment, but Sen. Dick Durbin, one of the sponsors of the legislation, is keeping a spotlight on the issue, calling for testimony on the topic from the card companies’ CEOs.
