News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

Merchant Groups Aiming to Speed up Process in Interchange Settlement Battle

Merchant Groups Aiming to Speed up Process in Interchange Settlement Battle

Objecting merchants can sign on with unusual move

By D.J. Murphy, Editor-in-Chief

DJ Murphy Last week, home improvement mega-retailer Lowe’s became the most recent influential merchant to go public in its opposition to the proposed settlement of a class action suit accusing Visa, MasterCard and more than a dozen credit-card issuing banks of violating federal antitrust rules in the way they set interchange rates.

Public statements are only the first salvo, however, in a battle to derail the settlement agreement—nearly seven years in the making—before it ever leaves the station. Large retailers and national merchant trade associations are now in the process of trying to convince a federal judge to end the legal fight before the agreement receives preliminary approval; a tactic attorneys on both sides agree is exceptionally uncommon.

According to the settlement agreement made public in July , members of the class have the right to object to the settlement in a written statement to the court “within the Class Objection Period.” (180 days after the judge grants preliminary approval and 90 days after the last official notification to members of the class). In the vast majority of cases, once a settlement agreement has been negotiated, this is the process the parties use to register dissatisfaction with the settlement.

Not this time. Several plaintiffs from the original lawsuit, including NACS—the trade group representing U.S. convenience stores and gas stations that was one of the first groups to object when the settlement was revealed in July—are spearheading a movement to circumvent the usual process and bring it to an end quickly.

How to Object

Attorneys for plaintiffs have confirmed they must file their motion for preliminary approval of the settlement agreement by Oct. 19, though one source says the legal team could be ready to file as much as a week sooner. Once that happens, the clock is ticking for the groups trying to block the proposal early, according to Douglas Kantor, partner in the Washington, D.C. office of Steptoe & Johnson and an attorney for NACS.

“We will have 30 days from the time the settlement is submitted for preliminary approval to file a brief urging the court to reject it,” Kantor says. “That will include declarations from many merchants raising concerns about and/or objections to the settlement.”

The objecting group and its attorneys are in the midst of developing a simple, turnkey method for any merchant to file a declaration of its objection to the settlement with the court, according to Lyle Beckwith, senior vice president of government relations for NACS. Until that method is ready, which may not be until the beginning of October, Beckwith encourages merchants that are against the settlement to contact him at . As details regarding the group’s effort to facilitate filing objections become available, Beckwith says NACS will notify merchants that have contacted him.

Effort Lacks ‘Due Process Considerations’

Other members of the class action suit, however, believe the effort to circumvent the court’s normal procedure is a disservice to merchants. In nearly all cases where a settlement agreement in a class action has been reached, preliminary approval is granted and the process moves forward with official notification to members of the class (in this case, any merchant that accepted a MasterCard or Visa payment from Jan. 1, 2004 onward) of the terms of the agreement. There is then an opportunity for the class to object.

 “While it is possible to object before preliminary approval, it is very unusual,” says Bonny Sweeney, partner with Robbins, Geller, Rudman & Dowd and co-lead counsel for class in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation .  “Most class members do not yet have any information about the settlement, other than what they have read in (incomplete and sometimes inaccurate) news reports, so it is hard to see what would be the basis of the objection.”

Sweeney says preliminary approval plays an important role in the process. It triggers official notification to the class of the actual terms of the settlement. Objecting to preliminary approval, she notes, will result in a large portion of the class never having been fully informed of its rights under the agreement and never having the opportunity to accept or reject the proposal—a violation of merchants’ right to due process.

“Objecting to preliminary approval means, in effect, that the objector does not want the other members of the class to receive notice of the proposed settlement, and does not want them to be able to voice their opinion as to whether the settlement should be finally approved,” Sweeney says. “At preliminary approval, no class member’s rights are affected.  So while the Court may hear objections at preliminary approval, the due process considerations that come into play at final approval are not present.”


So, as has reported before , there are several points where merchants can decide to take action, or not, during this process. At the moment, the choice is whether to become part of a highly unusual effort trying to block preliminary approval of the agreement or to adopt a wait-and-see stance. Those that wait, if preliminary approval is granted and the process moves forward, will certainly retain the right to object at a later date.

If efforts to block the settlement fail, according to attorneys on both sides, merchants should begin receiving notice in early 2013. will continue to track the settlement case to let merchants know what their options are at each significant milepost.



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Daniel Leibovitch