Trade Group Opts Out of Credit Card Pact

Expressing frustration with a $7.25 billion settlement that it calls a "bad deal" for merchants, the Retail Industry Leaders Association has backed off from the record settlement with the credit card industry.

A proposed $7.25 billion settlement of a lawsuit over credit card swipe fees has long been a point of controversy for many retail associations, but few have walked away from the deal entirely.

The Retail Industry Leaders Association (RILA), however, did so last week.

RILA, which represents the interests of such retail chains as Target and Walmart, announced Thursday it would opt out of the settlement. More details:

The issue: A legal battle between retailers and credit card companies that dates back to 2005 finally reached settlement in July 2012, but many plaintiffs expressed frustration with the outcome, including nearly 1,200 merchants and trade groups that said the deal would not sufficiently compensate retailers and would prevent them from bringing future claims against the defendants. In a brief filed in November urging the court to reject the settlement, the objecting plaintiffs argued that “the [litigation] release, given its scope, will make the competitive problems in the marketplace worse for merchants, not better,” the brief said. RILA was among the groups that took part in the brief.

Why RILA opted out: Among other things, the association claimed in a statement that the deal does little to get to the root problems business are facing—a duopoly between Visa and Mastercard, no long-term relief from costly interchange fees, a discouragement of innovation, and a removal of legal recourse. “The proposed settlement undermines merchants’ legal rights forever and fails to restrain the continued growth of swipe fees increases,” the group’s executive vice president, Deborah White, said in a statement.

Next steps: While most members supported the association’s decision to opt out of the agreement, White said, members who prefer to stay in the settlement may do so. “We do have the support from a large majority of our membership for opting out and objecting, and we want to make sure we’re shedding light on what the true ramifications are for the proposed settlement,” White told Reuters. The nearly 8 million merchants that the settlement covers have until May 28 to decide whether to opt out.

One one of the few major associations to take the stance, RILA isn’t the first. In February, the National Grocers Association recommended that its members opt out of the settlement, saying it does not reach the “fundamental objective” of the initial lawsuit.

A hearing on final approval of the settlement is scheduled for September 12.


Ernie Smith

By Ernie Smith

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

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