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Not so, argued NRF General Counsel Stephanie Martz. "It is the honor-all cards rules that inhibit competition,
She characterized the settlement as "a backroom deal and any 'equitable relief' settlement that leaves those rules
struck without the input of major retailers or the trade as- in place offers only illusory relief, increases the likelihood
sociations that protect the interests of small Main Street that litigation over the central restraints at issue in this
merchants." case will continue for decades, and fails to enforce anti-
trust laws," Walmart asserted.
In a letter to U.S. District Court Judge Margo Brodie, the
NRF complained the proposed settlement fails to end the Target, one of many merchants that opted out of the 2018
card brands' practice of centrally setting "default" fees in- settlement agreement, complained about the lack of an
stead of letting card-issuing banks compete against one opt-out clause in the current proposal. Like other oppo-
another over interchange. nents, it sees the proposed settlement as a bad deal for not
eliminating the honor-all-cards rule. In addition, the pro-
The NRF said it also wants a deal that eliminates the net- posed settlement "would provide cover for a naked price-
works' honor-all-cards rules, which dictate that merchants fixing agreement between Visa and Mastercard," Target
can't pick and choose which Visa or Mastercard credit/ insisted.
debit cards they accept (for example, refusing to accept re-
wards cards that carry higher interchange while accepting PayPal is biggest winner
lower-cost plain vanilla cards). @Richard Crone of @Crone Consulting LLC disagrees.
He described the proposed settlement as a "seismic shift,"
"The proposed settlement does not even approach the especially because merchants would be allowed to steer
type of relief that is required," the NRF argued, adding customers to lower cost payment methods and negotiate
that it comes on the eve of a trial that has been nearly a directly with the card brands on interchange rates.
generation in the making.
"This strategy isn't just for giants like PayPal, but a tool for
Walmart also wants the court to reject the proposed settle- all merchants, big or small, to optimize their transaction
ment. The mega-retailer wrote that smaller merchants and costs," he said.
their attorneys "sold out" their larger competitors by not
pressing for an end to the honor-all-cards rules. Elaina Smith, CFO, Superior Bancard, has a different take.
"The proposed agreement implies merchants have the
ability to offer different surcharges based on the type of
card present [e.g. rewards vs. plain vanilla]. But how are
they going to know?" she asks. It would require the ability
to look up the bank identification number [BIN] on every
card presented for payment, as well as explaining this to
customers "in a non-confusing way."

Larger merchants would benefit the most financially if
Judge Brodie decides to approve the proposed settlement.
Crone estimates that Walmart, alone, stands to save $261
million from a three-year moratorium on interchange
hikes. The "really big winners," Crone determined, would
be payment facilitators (dominated by PayPal) which stand
to save $606 million over three years.
And there's more. Based on Crone's calculations, the big
money is in elimination of the anti-steering rules. Perhaps
the biggest winner in that category would be PayPal. With
a merchant base of 35 million, PayPal would wield a lot of
negotiating power.

Crone said the market outlook is particularly good for all
mobile wallets, which would be allowed to charge for top
of wallet positioning. "[T]he settlement is set to invigorate
competition among mobile wallets, but PayPal is in the
best position to benefit," he said. "This is not to say that
the others, namely Apple Wallet, Google Wallet, Amazon
Pay and Walmart Pay, will not aggressively leverage their
platforms to do the same."

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