The docket at the U.S. Second Circuit Court of Appeals quickly attracted appeals to Judge John Gleeson's Dec. 13 ruling to
Home Depot Inc. and the Constantine Cannon LLC law firm, representing various merchants, had filed appeals Friday in New York, not long after Gleeson's ruling, which, on the surface, would effectively put an end to merchants' claims of interchange price fixing and eliminate their ability to bring future legal action against the card brands.
Home Depot and other merchants sought to appeal the ruling in its preliminary stages a year ago, but the circuit court
Gleeson's ruling last week allows merchants who did not opt out of the settlement to receive payment from a fund now valued at $5.7 billion, down from the original $7.25 billion proposal because fewer merchants stayed involved in the process.
"This is far from over," says Doug Kantor, general counsel for the National Association of Convenience Stores. "We're appealing and looking forward to airing our concerns about the settlement with the second circuit."
A key issue remains regarding the merchants' legal rights moving forward, Kantor says.
Of the merchants that opted out, a number have already filed lawsuits, and the rest still can, Kantor adds. But lawsuits are limited by terms of the settlement to monetary claims for the period of 2004 to November 2012, Kantor says.
"The settlement actually tries to cut off those plaintiffs, even though they opted out, from challenging any of the Visa or MasterCard rules, or suing for any future monetary losses because of their antitrust behavior," Kantor says.
As part of the settlement, future litigation would cover a timeframe from November of last year forward "into the indefinite future," Kantor adds.
The judge's ruling and the quick legal reaction of merchants is not surprising, says Gil Luria, analyst with Los Angeles-based Wedbush Securities.
"Many retailers do not see the settlement as the end of their struggles with Visa, MasterCard and their banks," Luria says.
Rather, the ruling in Gleeson's court represents only one front on which the retailers' fight against the card brands has unfolded, Luria says.
Retailers are engaged in a separate legal case on which they scored a victory with Judge Richard Leon calling for
"Concerning the legal front of this new [Durbin] battle, that's probably where most of the retailers' resources are going to go right now," Luria adds.
For the time being, MasterCard is preparing to mend fences with merchants.
The card brand is pleased that Judge Gleeson has granted final approval to the U.S. merchant class settlement agreement, MasterCard general counsel Noah Hanft says in an e-mail.
"Today is an important milestone in putting this litigation behind us and we look forward to working in partnership with the merchant community," Hanft states.
Visa CEO Charlie Scharf issued a statement that expresses his company's desire to put the legal issues in the past.
"We have realized a significant achievement in our efforts to resolve the long-standing legal differences between merchants and the payments industry," Scharf says. "This settlement, which was negotiated over many years, is fair for all parties involved."
Visa is confident the settlement agreement will open the door to "new opportunities for collaboration with our merchant clients so that we can more effectively grow our businesses, Scharf adds.
As an organization that has not taken an official position on the merits of the settlement, the Merchant Advisory Group has members who favor and oppose the settlement, says group CEO Mark Horwedel. However, those who oppose the settlement "greatly outnumber" those who favor it, Horwedel adds.
The settlement will do little to satisfy the demands of the broad merchant community that a more equitable card payment system is needed, Horwedel says.
"Contrary to views expressed by the card networks, as well as the many public commentators who regularly express sentiments on their behalf, this case will not close the ongoing dispute with the networks by merchants," Horwedel adds.
As such, merchants will continue to seek relief in the courts through legislation, and with regulators charged with enforcing existing laws addressing unfair competition, Horwedel says.
In addition, the ongoing legal tussles will pave the way for continued development of alternate payment schemes to compete directly with the card networks, he adds.
When the case first landed in Gleeson's court in late 2005, after a federal court decision in California to dismiss a merchant lawsuit challenging interchange, it set the stage for dozens of major retailers, including Wal-Mart Stores Inc., to makes claims of antitrust violations against the card brands.
Finally, in July of 2012, the card brands and their issuing banks
Many retailers were quick to
In November of 2012, as part of a two-step preliminary approval process, Gleeson again tentatively approved the settlement, saying some issues needed to be addressed, but none were serious enough to derail a preliminary sign-off.
Nearly a year later, in September of 2013, Gleeson had the option to make a ruling in the case after
Prior to that hearing, the card brands in August had determined they would
Not waiting on Gleeson to rule, various other merchants
Two months earlier,
In May,
The appeals court process could prolong the issues surrounding the swipe-fee settlement for another year or two, Kantor says.
This story has been updated to add a statement from Visa CEO Charlie Scharf.
