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03.28.17

SCOTUS Won’t Revive Settlement in Interchange Case

US_supreme_court_Washington_D.C_smA legal battle between merchants and payment networks over interchange fees that has been raging for more than a decade will continue now that the Supreme Court has declined to restore a $5.7 billion settlement agreement that was tossed out by a lower court.

The case dates back to 2005, when a group of retailers filed a class-action lawsuit against Mastercard and Visa for allegedly colluding to fix interchange fees charged to merchants when accepting credit card payments. In July 2012, the parties agreed to a settlement under which the networks would pay $7.25 billion and grant retailers the right to impose a surcharge for credit card payments. The deal came under fire from a number of retail groups and merchants, including Home Depot, Walmart and Target, which claimed the proposal gave the networks too broad a release from future interchange-related lawsuits. About 8,000 merchants opted out of the deal, reducing the settlement amount to $5.7 billion.

Despite the protests, the settlement was approved by a U.S. District Court judge in November 2013. However, a number of merchants appealed that decision and in July 2016, a federal appeals court rejected the proposed pact, agreeing with retailers’ argument that the proposed deal unfairly forced merchants to give up their rights to sue over interchange fees in the future. Soon after the settlement was scrapped, a group of mostly smaller retailers that were in favor of the deal asked the Supreme Court to take up the case and reconsider the settlement, arguing that merchants might not be able to negotiate a better deal than the one rejected by the appellate court.

However, the High Court this week declined to hear the appeal, declining the case without comment in a list of orders released March 27. With the settlement deal now scrapped, expect the legal wrangling to continue.

The Retail Industry Leaders Association (RILA) applauded the court’s refusal to revive what it called the “badly flawed” settlement. “We are pleased that the Supreme Court decided to leave the lower court’s ruling in place,” said Deborah White, senior executive vice president and general counsel, RILA. “Merchants and consumers continue to suffer from the anti-competitive practices of banks and card networks. We now have a fresh opportunity to curb these unfair practices.”

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Image Credits: Blake Everett

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