A polarizing figure from past battles between merchants and payments companies has returned to the interchange debate with harsh words — for both sides.
Lloyd Constantine, who maneuvered the card industry into paying the largest antitrust class-action settlement in history, has resurfaced six years later with a book about the case and some surprising criticism about other lawsuits that he sees as riding his coattails.
For example, don't look for his unequivocal support of a long-running merchants' suit alleging that interchange constitutes antitrust violations and price fixing.
"I'm not commenting on the ultimate merits of the cases, but they seem to be lawyer-driven cases. Our case was not a lawyer-driven case," Constantine, the lead attorney for Wal-Mart Stores Inc. and other merchants in the class action settled in 2003, said in an interview last week.
"They seem to be cases that had looked at our case and said, 'Look at those guys. Wow, they got rich.' I saw the process, I saw them running around the country, signing up clients — that's something that I've never done."
Constantine acknowledged the irony of such comments, having long been a target for similar accusations from payments industry members, especially after his suit was settled for $3 billion. (That included about $225 million in attorneys' fees.) The settlement, which also mandated the untying of debit card from credit card acceptance and a reduction in the interchange rates for signature-based debit, preceded a second round of lawsuits filed against Visa Inc., MasterCard Inc. and their bank customers.
His comments, and the book, "Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel," come as interchange has become an increasingly high-profile and mainstream issue, with advertising campaigns from merchants and networks alike, the public riled about the credit card industry in general and regulators and lawmakers looking into interchange.
And then there is the merchants' lawsuit in the U.S. District Court for the Eastern District of New York, which is seeking class-action status on behalf of plaintiffs including the National Association of Convenience Stores, the National Restaurant Association and merchants like Payless ShoeSource.
K. Craig Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP and the plaintiffs' co-lead counsel, called Constantine's comments "unfortunate and misguided," but said they were "not going to have any impact on our case."
Merchants were "very unhappy with the results of the Wal-Mart case," which was "a very narrow attack" on one part of the interchange system, Wildfang said. "They wanted true reform, which is why our cases were much more broadly based."
Constantine left the payments realm three years ago to join his protege, then-New York Gov. Eliot Spitzer, as a senior adviser in Albany, but his name still elicits strong reactions from industry members. Even his critics — several of whom were reluctant to speak on the record — characterize him as an intelligent and "dangerous" force in the payments industry.
"He's a figure that everybody in the networks is very, very aware of," said Eric Grover, the principal in the payments consulting firm Intrepid Ventures and a veteran of Visa. "I don't think there's anybody in the industry who's particularly fond of the guy, but there's a certain respect. He's aggressive, he competes to win, he's a smart guy."
After Gov. Spitzer's resignation last year, Constantine returned to semi-retirement and finished polishing up a book about the Wal-Mart case. "Priceless" was published Oct. 6, during the same week that members of the House Financial Services Committee held hearings on a bill that would regulate interchange fees, and Visa unveiled an advertising campaign aimed at lawmakers in Washington.
