Showdown over swipe fee price-fixing settlement

  • Article by: JENNIFER BJORHUS , Star Tribune
  • Updated: September 10, 2013 - 9:29 PM

Will one of the more intractable disputes in U.S. business history finally be resolved?

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MasterCard and Visa are part of a proposed $7.2 billion antitrust settlement.

It took seven years to reach a proposed $7.25 billion antitrust settlement between retailers and Visa Inc., MasterCard Inc. and the banks that issue their plastic cards.

It took another year to feud over the agreement.

On Thursday, supporters and opponents will sound off in a New York courtroom as part of what’s likely to be the final showdown over claims that the credit card companies broke antitrust laws by fixing billions of dollars in swipe fees that merchants pay each year.

Major retailers have objected to the settlement as perpetuating a broken payments system, with many backing out of it altogether. Some, including Target Corp., are taking new legal action.

U.S. District Judge John Gleeson, in charge of approving the historic settlement, will probably make a decision in 30 to 120 days.

Despite the beating the settlement has taken, class co-counsel K. Craig Wildfang as well as the defendants remain confident Gleeson will ultimately approve it.

“I think we’re likely to make some history,” said Wildfang.

Wildfang is the Minneapolis lawyer who has logged many hours over the past eight years helping represent the class of more than 7 million U.S. businesses covered by the pact. It’s estimated to be the largest private cash settlement in an antitrust class-action in U.S. history, although it has shrunk since so many retailers walked away from it.

The hearing will last just hours.

Visa and MasterCard, who have long denied any wrongdoing, are expected to repeat their position that the retailers don’t have a strong case, and that the costly litigation simply needs to end.

Lawyers for Target Corp. and Home Depot Inc. are reportedly on the speaking list. Also addressing the court will be Jeffrey Shinder from Constantine Cannon in New York, which represents the 10 named plaintiffs in the class-action lawsuit and 53 absent class members who objected, a group that includes many of the country’s biggest retailers such as Starbucks Corp., Best Buy Co. Inc., Nike Inc. and Lowe’s Cos. Inc.

The number of retailers who opted out accounted for more than 25 percent of the total credit-card volume from 2004 through 2012, according to MasterCard and a major retail trade group, a critical threshold. The level meant the defendants — Visa, MasterCard and 13 card-issuing banks including Wells Fargo & Co. — could have pulled out of the settlement. They did not.

The exodus of retailers reduced the total cash recovery to about $5.74 billion, Wildfang said, which still qualifies it as the largest ever private antitrust class-action settlement “by far.”

Given the shrinkage, attorneys have reduced their tab. The three law firms representing the class of retailers have reduced their request for legal fees and expenses to around $570 million. The firms include Minneapolis-based Robins, Kaplan Miller & Ciresi.

It’s not clear how the level of objections will affect Gleeson’s view of the settlement’s fairness.

Gil Luria, managing director of Wedbush Securities in Los Angeles, said he doesn’t think it will have a big impact. The settlement was negotiated under Gleeson’s supervision and guidance, he noted.

“The judge and the settlement have been going in a certain direction for a long time,” Luria said.

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