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An analysis from Keefe, Bruyette & Woods concludes that many more retailers would need to withdraw from the settlement with Visa and MasterCard to trigger a termination clause.
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The giant retailer has said it will oppose a swipe-fee settlement with Visa and MasterCard that was proposed earlier this month.
July 24
Banking reporters did a double-take Thursday when into their inboxes popped an email with the subject line "ABA Announces Opposition to the Proposed Swipe Fee Settlement."
As it turned out, the ABA in question was not the American Bankers Association. Rather, it was the American Booksellers Association, a 112-year-old trade group that represents independently owned bookstores.
After concluding that the settlement agreement announced in July over credit card interchange fees would be a bad deal for independent booksellers, the group is urging merchants to reject the proposed settlement.
"Ultimately, we believe that the adverse long-term effects of this settlement far outweigh any short-term monetary gain it might bring retailers," the group's chief executive officer, Oren Teicher, said in the news release.
The booksellers' group is the latest retailer or retail trade group to come out against the proposed $7.25 billion settlement in which Visa (NYSE: V), MasterCard (MC) and several large banks agreed to reimburse retailers that have been adversely affected by swipe fees.
On Friday, 10 of the 19 plaintiffs in the lawsuit said they plan to file a joint brief in opposition to the settlement in court.
"There is strong concern among our member companies that the proposed settlement will not achieve the litigation's most critical goal — to fundamentally change a broken marketplace in which swipe fees are set," Dawn Sweeney, the president and CEO of the National Restaurant Association, said in a news release. "We don't expect any settlement to address every flaw of the current system, but we cannot allow it to lock in the worst elements."
The proposed settlement would provide upfront cash to retailers, and in certain states it would provide them the ability to surcharge on credit card purchases, but it would also restrict their ability to affect how prices are set in the future.
The deal would put an end to years of legal fighting between payment networks, issuing banks, and retailers. Back in July, when the settlement was announced, the American Bankers Association said that the banks and their trade groups were ready to put the fight behind them.
However, the deal contains a termination clause for defendants if merchants accounting for 25% of credit card volume opt out of the settlement. The landmark agreement is expected to be submitted to the U.S. District Court for the Eastern District of New York by Oct. 19. Opponents to the settlement will have 30 days to respond.
