Judge Asked to 'Right or Reject' Swipe-Fee Deal
BROOKLYN, N.Y. (CN) - A $7.25 billion proposed settlement to end an eight-year class action over credit card swipe fees is "worse than losing at trial," the president of the Association of Convenience & Fuel Retailing told a federal judge Thursday during a fairness hearing on the settlement.
Hank Armour testified before U.S. District Judge John Gleeson in the Eastern District of New York.
"From the beginning of this litigation, our principal concern has been to obtain meaningful reforms of the credit card market to restrain the undue market power being used to set fees," Armour said. "Anti-competitive practices have resulted in our industry paying more in card fees than it makes in pre-tax profits every year since 2006."
In 2005, retailers alleged that Visa and MasterCard violated antitrust law by fixing swipe fees to generate more than $40 billion a year. The suit went to trial before Gleeson in September 2012, and in July 2013, a proposed settlement was reached.
The trial and settlement were the result of the consolidation of 14 different antitrust actions challenging "swipe fees" and "interchange fees" from New York, Connecticut, California and Georgia, representing more than 7 million businesses. The Judicial Panel on Multidistrict Litigation assigned it to Judge Gleeson in October 2005. It later became known as the "Payment Card Interchange Fee and Merchant Discount Antitrust Litigation."
The National Retail Federation also appeared before Gleeson, asking him to either "right or reject" the proposed settlement, which the group said needs to be rewritten to do more to bring fees under control.
"As it stands, the settlement rewards the perpetrators and traps the victims," NRF attorney Andrew Celli argued. "But it is not hopeless. It can be made fair. You have the power to make it so."
The judge did not issue a decision, and industry insiders expect a final decision within weeks.
Twenty-five retailers opted out of the settlement -- including 7-Eleven Inc., Wal-Mart Stores and Starbucks Corp. -- thus decreasing its chance of becoming one of the largest private cash settlements in an antitrust case in U.S. history.