'Merchants Object' Swipe Fee Website Under Fire

Published in CSP Daily News

Attorneys seek to derail effort to oppose settlement

ALEXANDRIA, Va. -- Attorneys pushing a class-action settlement with Visa Inc. and MasterCard over merchant transaction fees asked a federal judge to stop retail groups from posting what they say is inaccurate information on websites meant to encourage opposition to the deal, reported Dow Jones.

The law firms representing the proposed class of merchants say trade organizations including the National Association of Convenience Stores (NACS), National Grocers Association (NGA) and National Community Pharmacists Associations (NCPA), which want to derail the deal, are putting retailers at risk by urging them to opt out of the settlement without advising them of their rights.

Merchants Object! is a new nationwide campaign to inform those with merchant services accounts that a proposed settlement to a federal lawsuit aimed at solving the problem is one-sided because it will still allow Visa and MasterCard to price-fix swipe fees for their banks, it said.

Some of the groups have posted information on websites in recent weeks urging merchants to file objections to the deal in U.S. District Court as well as opt out of the settlement. For example, NACS, NGA, the National Restaurant Association and other groups urge merchants to file opt-out letters that can be filled out and submitted to the court through the Merchants Object! website, www.MerchantsObject.com.

The merchant groups hope to encourage enough opposition to convince U.S. District Judge John Gleeson to deny approval of the settlement. A fairness hearing to determine whether the settlement should be granted final approval is scheduled for Sept. 12.

Judge Gleeson granted preliminary approval to the deal in November.

"These unauthorized and misleading communications from the trade association plaintiffs pose a real threat of confusing class members and undermining the court-approved notice processes," the firms said in a letter filed in federal court Friday. The firms are Robbins Geller Rudman & Dowd LLP; Robins, Kaplan, Miller & Ciresi LLP; and Berger & Montague PC, which helped negotiate the settlement and serve as co-counsel for the proposed class.

The firms want the court to order the trade groups to disclose on their websites that their sites are not court-approved, provide a link to a separate court-approved website, confer with the class attorneys regarding communication they plan to distribute in the future before dissemination and correct factual errors.

Jeff Shinder, a managing partner with the law firm Constantine Cannon LLP, which is representing NACS and other plaintiff trade groups that oppose the deal, said there is "nothing remotely misleading about the trade association sites."

"Proponents of the settlement are afraid of allowing contrary views to be disseminated to the class," Shinder told the news agency. "They are attempting to impose some form of regulation on the ability of the objecting plaintiffs to communicate with their members and that raises first amendment issues."

The settlement, announced in July, has sparked opposition from large merchants like Walmart Target and Home Depot, as well as several trade groups that originally brought the litigation in 2005 against Visa, MasterCard and several banks that issue the payment networks' credit cards.

Critics of the deal argue that the settlement would do little to keep down the cost of interchange or "swipe" fees, which merchants pay each time a customer pays with a credit card. They also worry that the deal grants overly broad releases from future litigation to the defendants, making it difficult for merchants to sue Visa and MasterCard in the future.

Attorneys for the proposed class said in their filing that the site "attempts to influence visitors to opt-out and object based on a one-sided and incomplete presentation without referring the visitor to the neutral, factual and complete information about the case" included in the official court-approved notice sent out to merchants eligible for the settlement.

But Doug Kantor, who serves as counsel to NACS, said Merchants Object! is intended to give merchants the "unvarnished truth" about the settlement. "There's very little benefit in this settlement for merchants and there's a lot not to like," he told Dow Jones.

By opting out, merchants forfeit their right to receive a cut of the $6.05 billion that Visa, MasterCard and the banks have proposed paying to the class; however, merchants are unable to opt out of rule changes that Visa and MasterCard have already made under the settlement, including the elimination of a ban they had against surcharging customers who pay with credit cards.

Click here to view CSP Daily News coverage of the swipe fee issue.