Retail Groups Face Setback on Swipe Fees Settlement

Don't expect a quick-moving appeal in the ongoing legal battle over credit card swipe fees.

A long-running legal battle in the business world is unlikely to end anytime soon, thanks to action this week by a federal appeals court.

Retailers who had sought expedited treatment of their appeal challenging a $7.25 billion settlement in a lawsuit over alleged fixing of credit card interchange fees lost that bid in a federal appeals court this week, setting up what is likely to be a long appeal process. The Second Circuit Court of Appeals refused to allow the appeal to move ahead now, putting it on hold until the settlement receives final approval–which is not expected until September 2013.

More details:

The situation: For years, credit card companies have charged interchange fees, or swipe fees, to merchants and retailers, amounting to as much as 4 percent of the customer’s purchase. While efforts have been made to reform the fees, the record-setting settlement, which would give financial relief to businesses affected by the fees, was agreed upon earlier this year.

When we accept a card for payment, we don’t know if it is a relatively inexpensive one or just the opposite.

What frustrates merchants: Writing for the San Francisco Chronicle, Ted Burke, a director emeritus of the National Restaurant Association as well as a restaurant owner, noted that the lack of clarity is what rubs retailers the wrong way regarding the fees. “When we accept a card for payment, we don’t know if it is a relatively inexpensive one or just the opposite,” he wrote. “And when the swipe fee bill comes, it is impossible to know whether the fees are accurate. The card companies do not publish a rate sheet, and I have no way of tracking which card was used by which customer even if they did.”

The conflict: A number of major retail associations have found fault in this settlement and have delivered legal briefs asking the court to reject the settlement. Many of these groups said that, while the settlement was important, it would only be a temporary solution and would take away their right to bring lawsuits over the fees in the future. On November 9, however, U.S. District Judge John Gibson allowed the settlement to go forward on a preliminary basis, letting merchants sign on to the agreement.

Merchants that support the settlement, as well as the Electronic Payments Coalition, applauded the appeals court’s decision not to put the retailers’ appeal on the fast track. “We’re happy that the Second Circuit has agreed with us that there’s no imminent harm to anyone from preliminary approval and that [the court] is letting the approval process play out,” Craig Wildfang, the co-lead counsel for merchants that support the deal, told Reuters.


(Digital Vision/ThinkStock)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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