A major retail trade association said Wednesday it will reject a proposed $7.2 billion settlement with credit-card giants Visa Inc and Mastercard Inc over card fees, calling it a "bad deal" for nearly 8 million U.S. merchants.
The Retail Industry Leaders Association, or RILA, said it intends to "make a statement" by opting out of the potentially historic settlement just as lead lawyers for the plaintiffs and credit-card companies are preparing to file papers seeking final approval from a federal judge in Brooklyn , N.Y.
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RILA represents some of the largest U.S. retailers, including Walmart Stores Inc. , Target Corp. and Home Depot Inc, all of which have previously expressed dissatisfaction with the proposed settlement.
The move could prompt a new round of criticism of the deal from large U.S. retailers and possibly more opt outs. The credit card companies believe they have a judge's backing in the settlement, but a high number of opt-outs could imperil the hard-fought pact.
The proposed settlement, announced last year, would resolve an eight-year old lawsuit on behalf of U.S. merchants accusing Visa and Mastercard of artificially raising interchange, or swipe, fees, which are paid to process credit-card transactions. The settlement includes a $6.05 billion payment and $1.2 billion in temporary swipe-fee reductions, as well as changes to Visa and Mastercard rules to allow merchants to charge customers extra for using certain cards.
U.S. District Judge John Gleeson has already given preliminary approval to the proposal, potentially the largest private antitrust settlement in U.S. history. Nearly 8 million stores, restaurants and other merchants that accept credit cards have been given until May 28 to opt out or object to the deal.
If merchants opt out, they will not be eligible to receive a portion of the monetary damages. However, they will also not be bound by parts of the settlement that would prohibit them from suing Visa and Mastercard over similar interchange issues in the future, and could potentially bring their own lawsuits.
RILA general counsel Deborah White said that the group is opting out of the settlement on its own behalf, and that each of its members will have to decide individually whether to object, opt out or stay in the litigation.
"We do have the support from a large majority of our membership for opting out and objecting, and we want to make sure we're shedding light on what the true ramifications are for the proposed settlement," White said in an interview.
The group believes that the litigation releases in the settlement will force merchants to forego future legal claims against Visa and Mastercard in exchange for "paltry" monetary relief over years of harm from swipe fees, which have cost merchants billions of dollars, White said.
RILA is among the first major trade groups to come out swinging against the deal, which drew a flurry of opposition at the preliminary approval stage last year. The National Grocers Association said in February that it would opt out, and urged its members to do the same.
Visa, Mastercard and a lawyer for lead plaintiffs supporting the settlement did not immediately respond to requests for comment Wednesday evening.
Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents the payment card industry, said she remained "highly confident that this (settlement) will be approved, and that the interchange fee battle will finally come to an end."
A hearing on final approval is set for September.
(Reporting by Jessica Dye; editing by Andrew Hay)