Paper: Merchant Relief from Interchange Settlement ‘Illusory’
Aug. 23, 2012
A Georgetown law school professor took a look at the proposed settlement agreement and, from the perspective of merchants, found it wanting. In an academic analysis, Adam J. Levitin said that while the $7.25 billion total payout is more than twice the size of the largest previous antitrust settlement, the case has never been principally about damages.
“The interchange litigation has always centered on the reform of the interchange fee system,” Levitin wrote in the paper. “Accordingly, the settlement must be viewed as a total package of monetary damages and injunctive relief. Thus, while the cash component appears reasonable as a settlement, when viewed as part of the total package, it is much less impressive.”
Levitin said the rest of the “package”—limited ability to surcharge and the ability to collectively negotiate interchange rates with the networks in return for giving up the right to sue in perpetuity—does not constitute meaningful relief.
For a complete rundown of the details of the settlement that have not received wide coverage and a discussion of merchants’ options, see the new CardNotPresent.com feature article The Devilish Details of the Interchange Settlement Proposal: What’s a Merchant to Do?