business news in context, analysis with attitude

Bloomberg is reporting that the US Court of Appeals in Manhattan came down firmly on the side of retailers with a ruling today that rejects a $5.7 billion settlement of a case brought by retailers against Visa and MasterCard alleging improperly fixed credit card swipe fees.

While the settlement had been reached between lawyers for the card companies and attorneys representing the retailers, a number of major retailers - such as Walmart, Target and Amazon - had criticized it for being too weighted in favor of Visa and MasterCard; for example, they objected to a clause in the settlement that bound every retailer who ever takes either card, in perpetuity, to the terms of the deal, and they also had problems with being barred from ever suing the card companies again.

The judge specifically took issue with those clauses, and he criticized the retailer attorneys for not doing enough to protect the interests of their clients. "This is not a settlement; it is a confiscation," US Circuit Judge Pierre Leval wrote.

The Bloomberg story says that "the ruling is a blow to credit-card firms that sought to put an end to bitter court battles over fees amounting to tens of billions of dollars annually. The lawsuit, brought on behalf of 12 million merchants nationwide, was filed a decade ago after earlier disputes over the fees. The rejection of the deal raises the prospect that it will have to be renegotiated or the case may go to trial."

The story notes that "the settlement was announced in July 2012. Once worth as much as $7.25 billion, it was valued at about $5.7 billion as of August 2013 after reductions for about 8,000 merchants that dropped out of the damages portion of the lawsuit."

The ruling comes as both Walmart and Kroger are in court battles over debit card transaction fees, evidence that high tensions between the card companies and the retail sector have not only not subsided, but may be reaching new levels.

MasterCard said was disappointed by the ruling and was considering its options. Visa has not yet commented.
KC's View:
I'd say that the banks out to be licking their wounds at this point, and figuring out how to proceed without losing all their dignity. (This should be difficult. Which is a good thing.)

I'm sure there will be appeals and countersuits and press releases and all the lawyers will end up getting rich - even the clowns who apparently didn't do a decent job representing their clients. But as far as I am concerned, it is a good day when banks and lawyers get slapped around at the same time. Put 'em in their place, I say. It isn;t likely to last, but we can enjoy the brief victory while it lasts.

Here's the thing, though. This is the moment when retailers have to take the high road ... and communicate clearly and effectively to their shoppers that they are taking these legal steps to hold down prices and better represent consumer interests. That message has to be bold and unambiguous.

And then, of course, they have to live up to the claim. (That may be another issue. But that's for another day.)