NEW YORK – Attorneys for five named plaintiffs in the antitrust suit against Visa and MasterCard withdrew from the case Friday after their clients walked away from the landmark deal they helped craft.
The attorneys represented D’Agostino Supermarkets, Jetro Holdings, Inc. and Jetro Cash & Carry Enterprises, Affiliated Foods Midwest, Coborn’s, Inc., and NATSO, all of which participated in and helped craft the $7.25-billion settlement, indicating a further unraveling of the case.
The lawyers’ withdrawal came after their clients issued a statement calling on the U.S. District Court for the Eastern District of New York, which must approve the proposed class action settlement, to reject the deal. The group said it will file a brief in opposition to preliminary approval either on Nov. 13 or 30 days after the settlement proposal is filed.
The groups say rather than reforming the practices engaged in by the credit card industry, the settlement will allow the industry to “continue to take advantage of merchants and their customers while blocking competition and choice.”
Friday’s actions are critical in the case and make 10 of the 19 named plaintiffs in the case on record as opposing the deal, creating steep odds against judicial approval.
The named class plaintiffs opposing the landmark deal include: Affiliated Foods Midwest, Coborn’s, Inc., D’Agostino Supermarkets, Jetro Holdings, Inc. and Jetro Cash & Carry Enterprises, National Association of Convenience Stores, NATSO, National Community Pharmacists Association, National Cooperative Grocers Association, National Grocers Association, and the National Restaurant Association. Several other merchants groups likewise have expressed their opposition in recent weeks, including the National Retail Federation, Retail Industry Leaders Association and National Association of College Stores.
The stakes are huge for both Visa and MasterCard, and the banks and credit unions which control them. Lawyers for the National Retail Federation, which also opposes the deal, point out that a judicial ruling if the case goes to court could treble the damages paid by the parties.
Under the terms of the deal, Visa and MasterCard would pay $6 billion, and a handful of banks $1.25 billion, to 7 million retailers to settle a seven-year-old suit claiming the card networks violated provisions of the Sherman Antitrust Act by controlling interchange, or swipe fees, on credit cards.
The dispute is distinct from a long-running battle between the same parties of interchange fees on debit cards, which the Durbin Amendment directed the Federal Reserve to cap.
Credit unions have come to rely on significant income they earn from both credit and debit interchange. Industry experts say credit unions earn approximately $5 billion in interchange fees form Visa and MasterCard, about $2 billion from credit and $3 billion from debit. Credit unions also are significant investors in both companies – the only common stocks they are authorized to own – and stand to lose or gain from the costs of a settlement.