NRF Takes Gloves Off in Swipe Fee Settlement Objection Filing

The National Retail Federation (NRF) on Friday (April 26) asked a federal judge to reject the proposed settlement of a class-action antitrust lawsuit over swipe fees charged to merchants to process Visa and Mastercard credit card transactions.

“This ‘settlement’ is a backroom deal struck without the input of major retailers or the trade associations that protect the interests of small Main Street merchants,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “It fails to address anti-competitive practices that lead to ever-rising swipe fees that drive up costs for small businesses and prices for American families. It should be seen for the failure that it is.”

Whether or not the rejection would be considered is still unknown. At the core of the NRF and the Retail Industry Leaders Association (RILA) objection is what it says is the failure of the agreement to address the fundamental antitrust violations perpetuated by interchange rules.

Despite years of litigation, the objection stated, the proposed relief of decreasing interchange falls short of rectifying systemic issues plaguing the merchant community. It termed the proposed reductions in interchange fees as “trivial” when juxtaposed with current and proposed interchange rules.

The language of the objection is aggressive, and leaves the door open for further legal action, using phrases like “illusory relief for the merchants” and “defendants’ desire for ‘litigation peace.’”

Another issue pertains to the absence of opt-out rights for merchants. The proposed settlement, the NRF says, seeks to impose broad terms on a vast class of merchants without affording them the opportunity to opt-out and seek injunctive relief.

As stated in the filing, “our members will be bound by its unfavorable terms,” asserting the urgency of providing merchants with the option to opt-out and pursue alternative avenues for relief. Without this option, the document states, merchants are effectively coerced into accepting terms that may not adequately address their grievances. By forcing class members to waive all injunctive claims, irrespective of their relevance to the case at hand, the agreement potentially violates the Sherman Act, according to the NRF.

Additionally, the objections underscore the lack of consultation with the NRF and RILA throughout the settlement negotiations. Despite their efforts to engage with “Equitable Class Counsel,” the merchant trade groups say they were effectively excluded from the process, leading to substantive deficiencies in the proposed agreement.

The filing highlights this exclusion, stating, “Equitable Class Counsel have effectively frozen us out” and has resulted not only in an inadequate agreement but has also eroded trust in the legal process. The filing contends that Equitable Class Counsel failed to adequately represent the interests of merchants and instead prioritized expediency over substantive relief.

“Equitable Class Counsel have put their own interests above ours,” the objection states.

The NRF warned that it would object to the settlement when it was initially agreed to, but didn’t hint at the sweep of the objections. “We are still reviewing the proposed settlement, but we have some very real concerns,” the NRF stated on March 26. “The reduction of just a few basis points is within the range that swipe fees have fluctuated over the years and amounts to pennies on the dollar. The fact remains that these fees are an unfair business practice that harms merchants and consumers and benefits banks. This settlement in no way influences our commitment to move forward with passing the Credit Card Competition Act.”