NATSO Files Objection to Proposed Amended Interchange Fee Settlement
NATSO joined nearly 1,000 merchants and merchant associations in urging the U.S. District Court for the Eastern District of New York to deny final approval of the proposed amended settlement in the Interchange Fee and Merchant Discount Antitrust Litigation. This marks the third time Credit Card issuers have pushed for a settlement in this litigation. The courts have rejected two previous efforts.
NATSO and the merchants on Sept. 10 filed an objection to the settlement, which would grant Visa, Mastercard and other card-issuing banks sweeping immunity from their anti-competitive practices while providing merchants with meager and ineffective relief.
In its objection filed with the Court, NATSO argued that the proposed settlement is riddled with loopholes and would not meaningfully change the anticompetitive problems with the current system. Instead, it would immunize these harmful practices from legal challenge for “many years to come, and potentially in perpetuity.” To date, the Court has not permitted opt outs from the proposed settlement. The inability to opt out would bind retailers to the settlement and its liability release, eliminating a retailers’ right to seek present or future relief in Court.
The proposed settlement would direct Visa and Mastercard to reduce average credit card interchange rates by 0.1% for 5 years, representing only a small fraction of Visa’s and Mastercard’s current average rate of 2.36%. After 5 years, Visa and Mastercard could raise interchange fees. Any interchange fee relief provided also can be cancelled out if Visa and Mastercard increase the network fees currently charged to merchants on each card transaction. Additional loopholes allow Visa and Mastercard to increase their network fees anytime “in response to market conditions.” The proposed settlement also fails to contain language preventing the credit card companies from creating new types of merchant fees.
NATSO further objected to the proposed settlement’s “honor all issuers” rules that force merchants to accept Visa or Mastercard branded cards from every bank that issues such cards, even if the issuing bank provides substandard service or fraud prevention or imposes excessive or disproportionate fees.
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