One of the largest retail trade associations announced that it will reject a proposed $7.2 billion settlement with Mastercard Inc. and Visa Inc. in a lawsuit over increased credit card swipe fees. The Retail Industry Leaders Association (RILA), which represents several of the largest U.S. retailers, including Wal-Mart, Target, and Home Depot, are hoping that by opting out of the settlement, they will be making a statement to the credit card companies.
According to Reuters, the RILA’s decision to opt out of the settlement comes just as attorneys for both the plaintiffs and the credit card companies prepare to file papers seeking approval for the settlement from a federal judge in Brooklyn, NY. The settlement is one of the largest in United States History, and, if approved, would resolve an eight year old lawsuit.
In 2005, merchants across the United States filed a lawsuit against Visa and Mastercard, alleging that both companies artificially raised their interchange rate, which is the fee that a merchant must pay to process credit card transactions. When the interchange goes up, then a merchant must deduct a larger portion of the customer’s payment to process the customer’s transaction. The $7.2 billion settlement is made up of about $6 billion in payments in addition to $1.2 billion in temporary swipe-fee reductions.
All plaintiffs involved with the case have the ability to opt out of the settlement, whether they are represented by RILA or are a “mom-n-pop” candy store on Main St. By opting out of the settlement, each merchant or group waives their portion of the monetary damages, but could proceed with further action against the credit card companies. By opting out of the settlement, RILA has essentially announced that they will be pursuing more legal action in the future.
“RILA and the overwhelming majority of our members agree that the proposed class-action settlement is a bad deal for retailers,” said Deborah White, executive vice president and general counsel for RILA. “The proposed settlement undermines merchants’ legal rights forever and fails to restrain the continued growth of swipe fee increases.”
As usual, the proposed settlement includes stipulations that future increases in the interchange rate can be passed right along to the consumer, so regardless of which companies receive a portion of the $6 billion, expect your groceries to become more expensive.