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NEW YORK -- U.S. District Court Judge John Gleeson has granted preliminary approval to the proposed $7.25-billion settlement between retailers and Visa Inc., MasterCard Inc. and other financial institutions.
Gleeson made his decision after hearing oral arguments on the swipe-fee deal in U.S. District Court, Eastern District of New York in Brooklyn, N.Y. this morning.
The deal, which would bring an end to a seven-year class action lawsuit, was reached in July and was immediately met by steep opposition from retailers and industry associations -- some of which are parties to the case and some that aren't. Proponents argued that the settlement does not introduce competition and transparency into the credit card swipe fee market. They also claimed the deal releases Visa and MasterCard from future litigation, as CSNews Online has previously reported.
However, Gleeson said during the hearing that concerns raised so far "have been overstated." He said opponents at this stage haven't raised sufficient arguments to "derail preliminary approval," according to MarketWatch. As a result of the preliminary approval, changes to Visa and MasterCard rules are set to take effect in 60 days.
NACS, the Association for Convenience & Fuel Retailing was the first to speak out against the proposal. The trade association's board of directors, comprised of more than two dozen merchants, unanimously rejected the proposed settlement agreement.
Friday afternoon the association said it -- and a number of other merchant groups -- will likely appeal the decision. "We remain convinced that this is a bad deal and we will look at our options to appeal this decision. This bad deal should not be forced upon the vast majority of merchants and -- their customers -- who do not want it," said NACS President and CEO Hank Armour.
The path to final approval is a long one, and NACS and the other named plaintiffs want a trial to establish that the anticompetitive practices engaged in by the credit card industry are illegal, the association added.
"The merchant community is deeply committed to reforms that bring transparency and competition to the broken electronic payments market. The volume and diversity of those objecting to this flawed proposal is remarkable and continues to grow. Today's hearing was the first of many opportunities for the merchant community to highlight the substantial flaws in the proposed settlement," said Jeff Shinder, managing partner, Constantine Cannon LLC. "We will seek to appeal today's ruling in order to stop the misleading notice from being sent to merchants and to put the brakes on a proposed settlement that would cause significant harm to merchants and ultimately their customers."
Shinder is counsel to a majority of named class plaintiffs in the case that object to the settlement.
The National Retail Federation (NRF), which was not a party in the class-action lawsuit, also said it will explore all legal options following the judge's preliminary approval.
"We respectfully disagree with the court's assessment of the proposed settlement," NRF Senior Vice President and General Counsel Mallory Duncan said. "We do not believe the proposal meets the legal tests required to meet even preliminary approval. Retailers, their customers and competition would suffer irreparable harm if this one-sided deal is allowed to move forward. We will consult with our attorneys and act as soon as possible to correct this injustice.
"This proposal benefits no one but lawyers and credit card companies, and should not be forced on the retail industry or retailers' customers," Duncan added. "It's a morass of legal flaws, and rather than bringing about reform it would only entrench the anticompetitive behavior of the card companies while putting them beyond the reach of the law."
If the proposed settlement gets final approval, it would be the largest federal antitrust settlement in U.S. history, offering nearly eight million merchants $7.2 billion in cash and temporary reductions in interchange, or swipe fees, which stores must pay to process credit and debit transactions.