Judge Hears Final Complaints Over Interchange Settlement

More than a dozen critics and objectors spent five hours trying to derail the record-breaking $7.2 billion payment-card interchange settlement in a Brooklyn federal courtroom on Thursday (Sept. 12), Reuters reported.

U.S. District Judge John Gleeson did not rule at the end of the hearing, saying he had been presented with "very important and difficult issues." His decision could take months to deliver.

The "fairness hearing" was the final step for the judge to determine whether to give final approval to the settlement, which was hammered out by both sides in a class-action lawsuit first filed in 2005 that accused Visa (NYSE:V), MasterCard (NYSE:MA) and several card-issuing banks of fixing the fees charged to merchants each time customers used their credit or debit cards. But the most controversial part of the settlement was something that was not part of the original lawsuit: a provision that would bar all future merchants from suing over Visa and MasterCard's interchange rules, whether they chose to be part of the settlement or not.

Judge Gleeson gave the settlement preliminary approval in November 2012. But since then, more than 8,000 merchants have opted out of the settlement, who together handle more than 25 percent of all U.S. payment-card transaction volume. Those merchants would collect no money in the settlement, but would still lose their right to sue over interchange rules in the future.

Among the objectors on Thursday were Home Depot (NYSE:HD), which claimed that the no-future-lawsuits provision violates the Fifth Amendment's Due Process Clause; Amazon (NASDAQ:AMZN), which argued that because 10 states outlaw swipe fees, the settlement's provision that allows merchants to charge those fees is useless and thus barred by the U.S. Supreme Court; and Crate & Barrel, which pointed out that any merchant that accepted American Express would also be unable to surcharge.

By the end of the marathon hearing, Judge Gleeson was clearly frustrated, asking at one point, "Is this ever going to come to an end without comprehensive legislation?" But the judge also said he had concerns that the controversial release of the card brands from future litigation might cover territory that could not be foreseen.

For more:

- See this Reuters story
- See this Wall Street Journal story

Related stories:

Interchange Settlement Economist: It's A Good Deal Except For Letting Visa And MasterCard Off The Hook
Visa To Court: Tell Walmart We're Not Anti-Competitive
Two Cities Object To Interchange Settlement Because Under It They're Merchants, Too