Dive Brief:
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Retail industry groups hailed a U.S. Supreme Court decision Monday that let stand a lower court ruling from last year nixing a $5.7 billion settlement over card swipe fees between retailers and credit card issuers Visa and MasterCard.
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In a court battle stretching back a decade, retailers and trade groups have contended that Visa and MasterCard conspired to fix interchange fees applied to merchants for handling credit card payments — fees that total some $40 billion annually.
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The Second U.S. Circuit Court of Appeals in New York (which also sided with retailers last year in a challenge to a New York law that prohibits merchants from charging fees to shoppers who use credit cards) had been harsh in its assessment of the original 2012 settlement and said that it failed to address the demands of non-participating retailers, among other flaws.
Dive Insight:
Visa and MasterCard have established swipe fees, also known as interchange fees, and they’ve become a routine — and, for retailers, expensive — part of doing business. Part of retailers’ argument is that the practice hurts consumers, too, because they’re forced to pass on the cost in the form of higher prices, though that ability is hampered by price pressures in many categories.
Many retailers agreed that the original 2012 court settlement (once worth as much as $7.25 billion, estimated to be the largest-ever U.S. antitrust deal ever) did nothing to change the practice under which they were forced to pay these interchange fees, so some 8,000, including Macy's and Home Depot, opted to withdraw from the settlement, driving its value down to about $5.7 billion.
While the credit card issuers (and those retailers still participating in the settlement) likely had hoped the agreement would put the longstanding argument to rest, at least in some quarters, ongoing litigation was likely even if the settlement had stood. The fact is, though, it’s back to the drawing board.
“[The] settlement crafted by the banks and the credit cards was badly flawed, and the Second Circuit recognized as much in its decision [last year],” Deborah White, senior executive vice president and general counsel of the Retail Industry Leaders Association, said in a statement emailed to Retail Dive. “We are pleased that the Supreme Court decided to leave the lower court’s ruling in place. Merchants and consumers continue to suffer from the anti-competitive practices of banks and card networks. We now have a fresh opportunity to curb these unfair practices.”