The proposed antitrust settlement regarding the setting of interchange by Visa and MasterCard is continuing to attract challenges, most recently by Senator Richard Durbin, whose efforts led to the capping of debit card interchange in the U.S.
“This is a stunning giveaway to Visa and MasterCard,” Durbin, the Senate’s second-ranking Democrat, said in remarks last week, according to the Congressional Record. “This is a bad deal, but it is not a done deal. The merchant plaintiffs still have to decide if they will support it.”
“It gives Visa and MasterCard free rein to carry on their anti-competitive swipe-fee system with no real constraints and no legal accountability,” said Durbin, of Illinois. “This is not a settlement I would agree to. I hope that the remaining merchant plaintiffs will review the proposed settlement carefully and think hard about whether it will be good for the future of our credit- and debit-card systems.”
The settlement’s lack of a prescription for structural/procedural changes in interchange setting, as well as the protections gained by the card networks against future litigation, have fostered merchant defections from the settlement. As high profile merchants and retailer groups have opted-out of the settlement, the possibility of interchange-limiting legislation has become a new threat, although the likelihood of successful legislation is in doubt. On the other hand, new lawsuits could result.
Supporters of additional interchange legislation may struggle to win enough backing in Congress, which approved Dodd-Frank when Democrats controlled both chambers. Republicans, most of whom opposed the price caps, seized control of the House after the 2010 election and 54 senators led by Jon Tester, a Montana Democrat, voted last year to delay the implementation of Durbin’s debit rules. The measure required 60 votes for passage.
“It’s highly possible Senator Durbin will introduce credit interchange legislation in next year’s Congress, though it will be very challenging to gain broad-based support,” Jason Kupferberg, a Jefferies & Co. analyst who covers Visa and MasterCard, said in a July 20 research note. “Some of the class plaintiffs could opt out of the settlement and initiate new lawsuits.”
In spite of the high profile opt-outs from the settlement announced to date, Visa has stated publicly that they expect the settlement to be approved.
“We are very confident that the court is going to approve this settlement,” Josh Floum, Visa’s legal chief, said in a July 25 conference call after the company reported fiscal third-quarter results. “This case has been pending for seven years, and during a great deal of that time, there has been a court-ordered mediation process with two mediators and the involvement of the court.”
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