The series of antitrust class action lawsuits first brought by
While the 2024 Settlement does not provide any direct monetary relief to class members,
Participants should, however, exercise caution before making any material financial, operational, or strategic decisions based on the terms of the 2024 Settlement. As further discussed below, the 2024 Settlement remains subject to final approval by the district court, and a decision to approve or reject is likely to be appealed. The fate of the prior settlement attempted with respect to this merchant class in 2012 may call certain aspects of the 2024 Settlement into question. It is therefore at least questionable whether the 2024 Settlement will be approved and upheld in its current form.
Key Terms of the 2024 Settlement
Changes to surcharge rules
While the 2024 Settlement retains
Reduction in interchange on domestic credit transactions
Changes to no-discrimination rules
Changes to "honor all wallets" rules
Merchants will no longer need to accept any wallet that provides access to a
Buying groups
Merchants will be allowed to form buying groups to negotiate collectively any terms that affect them with
Questions Surrounding the 2012 Settlement
In 2016, the 2nd Circuit vacated the district court's certification of two merchant classes and overturned its approval of a settlement agreement that the parties entered into in 2012 (the "2012 Settlement").12> While the 2nd Circuit's decision primarily rested on the conflict of interest inherent in the same counsel representing both the class of merchants that had accepted
No one disputes that the most valuable relief the Settlement Agreement secures for the (b)(2) class is the ability to surcharge at the point of sale. To the extent that the injunctive relief has any meaningful value, it comes from surcharging, not from the buying-group provision, or the all-outlets provision, or the locking-in of the Durbin Amendment and
The 2024 Settlement applies to a single class of merchants (the Legacy Merchants having settled their claims in 2019), and therefore the conflicts issues that plagued the 2012 Settlement are less relevant in this case. Nonetheless, while the 2024 Settlement also introduces additional merchant-favorable terms, the court's objections to the analogous terms in the 2012 Settlement still hold true to a great extent. Merchants in states that prohibit surcharging will still receive no benefit from the relaxation of the surcharging rules. Even in states where surcharging is permitted, the amount of the surcharge is effectively capped at 1% for merchants to the extent that any competing network does not permit surcharging, as uniform surcharging across brands is a condition to applying the higher 3% cap allowed under the 2024 Settlement. On the other hand, the 4-7 basis point reduction in domestic interchange is a significant improvement over the 2012 Settlement.
Given the 2nd Circuit's dismissiveness over the value of the all-outlets and buying group concessions, the inability of class members to opt out of the 2024 Settlement and the stated intention of many large retailers to dispute its terms, it is at least questionable whether the 2024 Settlement will be approved and upheld in its current form.
Footnotes
1. Class Settlement Agreement of the Rule 23(b)(2) Class Plaintiffs and the Defendants, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 05-md-01720 (E.D.N.Y),
2. 2024 Settlement § 28(a) and (b), and § 60.
3. Id.
4. Id.
5.2024 Settlement § 28(c) and 60(c).
6. 2024 Settlement § 33 and 65.
7. 2024 Settlement § 1(b)
8. 2024 Settlement § 34 and 66.
9. 2024 Settlement § 19 and 51.
10. 2024 Settlement § 24 and 56.
11. 2024 Settlement § 29 and 61.
12. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 827 F.3d 223 (2nd Cir. 2016).
13. Id. at 238.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Dsu-Wei Yuen
URL: www.dwt.com
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