Nearly fifteen years after a class of merchants first brought suit against Visa, MasterCard, and their member banks in the MasterCard/Visa Interchange Fee Litigation, retailers can finally see the light at the end of the tunnel.  For years, the increasingly cashless economy has put pressure on retailers to accept credit cards for payment, but mounting “swipe fees” made card acceptance one of the highest costs of doing business.  But on December 13, 2019, Judge Margo Brodie granted final approval of the multi-billion dollar class action settlement – the largest antitrust settlement in U.S. history – giving merchants an opportunity for some cash relief.

More details on the history of the Interchange Fee litigation can be found in our last post from May 2019. As appeals are pending, no claims deadline has been set and claims forms are not currently available; however, merchants can pre-register online to receive the form upon court approval. Class members do not need to sign up with a third-party service in order to participate in the class. Additional information regarding the class settlement can be found at the court-approved website.

Since the settlement was first announced in October 2018, approximately 26 percent of merchants have opted out, leaving behind upwards of $5 billion for retailers nationwide. As anticipated, the fifteen-year battle between merchants and the card networks will continue in the Second Circuit, with a number of class members appealing the final approval order.  However, many observers believe that the settlement will be affirmed.

This is not the first time that a deal between the card networks and merchants has been challenged on appeal.  In 2016, the Second Circuit vacated a proposed $7.25 billion settlement that bound merchants to a perpetual release of all future claims relating to the merchant rules.  Since then, the parties have limited the release to five years to address the numerous objections by retailers and merchants nationwide.  Meanwhile, an injunctive relief class continues to litigate in the hopes of achieving rules relief, an objective that retail industry groups, such as the National Retail Federation, have been closely monitoring.

What’s Next for Retailers?

Although the $5 billion settlement fund will not be paid out until the appeals process concludes, the claims administrator has allowed merchants to preregister their claims until the court can set a formal claims deadline.

But even though distribution of the class settlement fund appears to be on hold, retailers should not wait on the sidelines.  There are a number of opportunities to consider that can impact the value of a given retailer’s claim and timeframe for relief.  Outside legal counsel can help retailers take a tailored approach to evaluating their options and select a strategy that will further the business objectives of each individual retailer.  Some of these strategies for recovery include, but are not limited to:

  • Remaining in the Class. Retailers may elect to remain in the class and file a claim as a member of the class settlement.  This option may be the least burdensome for retailers as it does not require merchants to independently verify their transactional data. Nonetheless, it is advisable for merchants to carefully consider the nuances of their business that may not be captured during the claims administration process and to take action to correct that.  Additionally, retailers remaining in the class will likely be forced to wait a minimum of 2–3 years before a payout is realized, due to the size and complexity of the claims administration process.  Furthermore, there is a continued risk that the settlement will be rejected on appeal for a second time.
  • Sale of Claim. If increasing cash flow in the short term is a priority, retailers may want to consider monetization through a sale and assignment of their claims.  A market for these claims has been increasingly developing since the parties have reached their current class settlement, and a number of third-party funders are now making offers for good value on these claims.  This option provides more certainty of recovery on an accelerated timetable.  There are also many ways for retailers to structure a sale that will generate interest among multiple bidders and obtain competitive offers.
  • Exploring Related Cases in Other Jurisdictions. Retailers with business operations outside of the U.S. should also track recovery opportunities that may be present abroad. In 2018, various Canadian courts approved settlements totaling CAD $68.5 million.  In Europe, the UK Supreme Court agreed to hear MasterCard’s appeal of a $17.5 billion lawsuit, challenging the Court of Appeal’s ruling that permitted a consumer class action lawsuit against MasterCard to proceed.

It is important for retailers to examine their options early on, engaging in a cost-benefit analysis for expected recoveries and potential timeframes for relief.  Retailers can benefit significantly by developing a strategy that is consistent with their business goals and maximizes the value of their claims.