NEW YORK (AP) — A group of retailers and trade groups has launched a last-ditch effort to stop a settlement worth at least $6 billion that Visa (NYSE:V), MasterCard (NYSE:MA), and major banks have agreed to pay retailers for alleged fee fixing.
Ten out of the 19 retailers and trade groups that are plaintiffs in the class action lawsuit against the credit card companies say they're trying to block the deal because they believe it would allow the credit card industry to continue to take advantage of merchants and their customers while stopping competition.
The proposed settlement, which was disclosed in July, is expected to be submitted to the U.S. District Court in Brooklyn by Oct. 19. Merchants objecting to the deal will then have 30 days to submit arguments urging the court to reject the proposal.
Under the settlement, stores will be allowed to charge customers more if they pay with a credit card. The settlement covers only U.S. transactions. But the plaintiffs says that the settlement will not stop swipe fees from continuing to rise, which will hurt both retailers and shoppers, and that it will prevent any future legal challenges.
"There is strong concern among our member companies that the proposed settlement will not achieve the litigation's most critical goal — to fundamentally change a broken marketplace in which swipe fees are set," said Dawn Sweeney, president and CEO for the National Restaurant Association, one of the plaintiffs opposing the settlement. "We don't expect any settlement to address every flaw of the current system, but we cannot allow it to lock in the worst elements."
Other recent plaintiffs to join the growing chorus include D'Agostino Supermarkets, and Jetro Cash & Carry Enterprises, a supplier that serves grocery retailers and food-service operators.
They join other trade groups including the National Association of Convenience Stores, National Grocers Association and National Community Pharmacists Association. Other retailers, including Wal-Mart Stores (NYSE:WMT) and Target (NYSE:TGT), that are not part of the class action suit also have expressed objections.
The National Retail Federation, the nation's largest retail trade group and also not a party to the lawsuit, says it is has the authorization from its board of directors to file an objection with the court. It is made of up more than 9,000 retailers.
Trish Wexler, a spokesman for the Electronic Payment Coalition, a trade group made up of Visa and MasterCard, believes the objections are politically motivated. She says they are trying to mount a case for legislation to curb credit card swipe fees.
"This is their job, to throw bombs and to make noise and to march up to Capitol Hill with their hands out," she said.
Officials at Visa could not be immediately reached. Jim Issokson, a spokesman at MasterCard, said, "We look forward to the court's approval."
According to Craig Sherman, vice president of government affairs for the National Retail Federation, the plaintiffs that support the settlement include Payless ShoeSource and Scanmyphotos.com, a photo digitization company based in Irvine, Calif.
Mitch Goldstone, CEO of Scanmyphotos.com, the first lead plaintiff back in 2005, says that he is "thrilled" with the settlement. "This is the very best deal," he said. "They were in the same meetings as I was and I am supporting it."
Goldstone added that if there wasn't a settlement, MasterCard and Visa could charge as much as 10 percent of a transaction in swipe fees. He also noted that the proposed settlement allows retailers to sue the banks if they commit other violations such as price fixing.
Payless ShoeSource couldn't be reached immediately.
In July, Visa, MasterCard and the banks settled a long-standing lawsuit brought by several retailers that claimed card issuers conspired to fix merchants' fees for accepting credit cards. Retailers have long complained about the billions of dollars in "swipe" or "interchange" fees that they have had to pay, which average about 2 percent of the price of a purchase.
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