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February 22, 2013

Grocers Association Intends to Opt Out of Credit Card Swipe-Fee Settlement

By Jeffrey May, J.D.

The National Grocers Association (NGA) announced yesterday that it will opt out and object to a proposed settlement that would resolve an antitrust class action against Visa, MasterCard, and major U.S. financial institutions. The suit alleges a conspiracy to fix swipe fees, or charges that retailers pay to accept credit cards. NGA also said that it would recommend that its members opt out and object to the proposal.

The proposed settlement would provide an estimated $7.25 billion to merchants who accepted Visa and MasterCard credit cards and debit cards in the United States since 2004. It would resolve merchants' claims that the payment card networks violated federal antitrust law by artificially inflating the interchange fees that the merchants paid on payment card transactions. The settlement is considered to be the largest ever in a private antitrust case.

In addition to providing the monetary payments, the settlement would give merchants the ability to impose surcharges on customers who present Visa or MasterCard-branded cards for payment. Further, merchants would be able to discount particular brands or types of cards in order to steer consumers to the merchant's preferred method of payment.

The federal district court in Brooklyn, New York, on November 9, 2012, granted preliminary approval of the proposed settlement. On December 10, 2012, the U.S. Court of Appeals in New York City denied a request for expedited review of that order. The district court is scheduled to hold a fairness hearing on September 12, 2013.

Late last month, notice of the settlement was sent to approximately 8 million merchants. Class members must notify the court by May 28, 2013, if they do not want to participate in the settlement, or if they want to submit a written opposition to the settlement. Approval of the settlement is supported primarily by smaller merchants. The National Retail Federation and a number of large retailers have expressed their opposition to the settlement.

In announcing its opposition to the settlement, the NGA said that the proposed settlement "does not achieve the fundamental objective of restructuring and reforming anticompetitive credit card swipe fees and payment rules, and will only make matters worse for consumers and merchants." The settlement "does not meet the standard for being fair, adequate and reasonable." "The NGA Board carefully considered not only what is in the best interests of the retailers and wholesalers it serves, but also all other merchants who will be adversely affected by the proposed settlement," said NGA President and CEO Peter J. Larkin. "It is clear to NGA that by deciding to opt out and object to the proposed settlement it sends a clear and unequivocal message that the proposed settlement should be rejected at the fairness hearing."

The NGA was joined in the class action litigation by three of its members, Coborn's Inc., D'Agostino Supermarkets, and Affiliated Foods Midwest, along with Jetro Holdings Inc., Jetro Cash & Carry Enterprises, and five other national trade associations.

The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-MD-1720 (JG) (JO), MDL 1720.

Companies: National Grocers Association; MasterCard, Inc.; Visa, Inc.

MainStory: TopStory Antitrust

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