States Join Retailers to Oppose Credit Interchange Settlement

by Mercator Advisory Group 0

Adding their voices to those of major retailers objecting to the antitrust settlement, nine states have filed objections to the proposed agreement. Also, 48 states signed on to a brief supporting these objections.

The states argue the settlement attempts to release Visa and MasterCard from claims that the states could bring against the companies in the future for actions that may harm their citizens, a legal doctrine called “parens patriae.”

“As drafted, the settlement agreement opens the door for defendants to assert settlement releases against attorneys general or other law enforcement agencies in future law enforcement actions related to the payment card industry,” the states said in the filing.

But this is just one of many legal actions recently filed:

A group of retailers including Target, Macy’s Inc. (M), Saks Inc. (SKS) and Kohl’s Corp. (KSS) filed a new lawsuit against Visa and MasterCard last week, arguing previous efforts to curb the companies’ alleged anticompetitive behavior have failed.

While some are clearly concerned about giving away rights to litigate regarding interchange in the future, it is clear that some consider the settlement to be inadequate in amount, and that surcharging rights gained under the settlement are ineffective ways to recapture payment expense:

Critics argue the amount of money is too small compared with the amount of interchange fees merchants pay, and claim surcharging under the terms of the settlement will not work because at least 10 states ban the practice and more have recently passed laws or introduced legislation to do so. They also say surcharging rules by competing network American Express Co. (AXP) further complicate their ability to implement the practice.

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