As expected, the federal judge has now granted preliminary approval of a $7.25 billion class-action settlement in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation case saying opponent’s arguments were not persuasive enough to derail the deal.
Calling opponent’s concerns voiced so far "overstated", the U.S. District Court Judge did note the bar for preliminary approval is significantly lower than for final approval, a decision not expected until next year.
Under the settlement, millions of merchants would receive payments totaling $6.05 billion. Those merchants on direct Interchange pass through pricing will also see a temporarily reduced swipe fee by an amount equal to $1.2 billion. And merchants in states that don’t prohibit by law will be able to charge extra fees to customers who pay with credit cards.
The judge’s preliminary approval decision allows plaintiffs to begin signing up more than 7 million retailers that might be eligible to participate in the settlement. It also means rule changes, including the ability to impose surcharges on customers who use card payments, are set to take effect in 60 days.
Yet all this could become void if final approval isn’t granted. Everyone following the case expects that opposition to the settlement will grow louder as the final approval date draws closer. Ever since the proposed settlement was announced some big box retailers and national trade associations have come out against the deal arguing that it grants overly broad releases to Visa and MasterCard.
Some have noted that the big box retailers that opposed the settlement are doing so because they are starting a competing payment network called the Merchant Customer Exchange. American Express has voiced similar concerns saying they worry the settlement would hinder their ability to bring antitrust claims against MasterCard and Visa in the future.
However, not all large merchants and trade groups are against the deal. Plaintiffs in favor of the settlement said the objectors are misinformed or have other agendas. Attorneys who negotiated the deal on behalf of merchants defended the settlement, arguing that it includes substantial reforms for merchants that will put downward pressure on Interchange rates. While still other large merchants including Kroger Co., Walgreen Co. and Safeway Inc., have struck their own deals to settle with the card companies already.