A group of major retailers have banded together to fight interchange fees – the swipe fees charged by credit card networks to process credit card transactions. This new suit follows a similar one filed in 2005, which is still in litigation.
This time, Target, Macy’s and 15 other retailers have filed another antitrust suit, which alleges that Visa and MasterCard are illegally interfering with competition because they set default rates and nearly identical terms for accepting credit cards. Interchange fees are usually between 1.5% and 3%, and retailers say they drain them of millions of dollars each year.
“Plaintiffs have paid and continue to pay significantly higher costs to accept Visa-branded and MasterCard-branded credit and debit cards than they would if the banks issuing such cards competed for merchant acceptance,” the retail groups’ lawyers said in the formal complaint filed this week in U.S. District Court in Manhattan.
The 2005 antitrust suit is still going despite a court-approved $7.25 billion settlement offer last November because many retailers who were party to the case rejected the settlement offer from the payment processors. Another hearing in that matter is set for September 12.
Visa and MasterCard fight back
Meanwhile MasterCard and Visa have asked the federal judge on the case to declare that the fees do not violate antitrust laws in order to gain leverage in this legal tug-of-war.
Some of the groups who opposed the settlement, including the National Association of Convenience Stores, the National Grocers Association, and the National Restaurant Association.
Big retailers not giving in
The list of stores participating in the latest antitrust suit include Macy’s, Kohl’s, J.C. Penney, Saks, Staples, Target, Office Depot and Office Max. Costco and Walmart said on May 21 that they would opt out of the new suit, with an eye toward filing lawsuits of their own.
State governments are on the side of retailers. Nine states have filed objections to the proposed settlement and 48 have signed a brief supporting these objections arguing that the proposed settlement would release Visa and MasterCard from future claims by residents of those states.
“As drafted, the settlement agreement opens the door for defendants to assert settlement releases against attorneys general or other law enforcement agencies in future law enforcement actions related to the payment card industry,” the states said in the filing.
For shoppers, it’s business as usual. When laws changed last January to allow retailers to pass swipe fees on to their customers instead of absorbing them as they had always done, most retailers opted not to do it.