Page 22 - GS240702

CoverStory

Here's the really scary thing about It is unclear how many merchants have done the work
to claim their share of the kitty. But Louis Teplis, CEO of
the Supreme Court decision on debit Collectively, a firm that helps consumers and businesses
card caps: the merchant, a North collect monies from class action suits, said in a recent
Merchant Sales Podcast that only about 35 percent of mer-
Dakota truck stop, didn't even open chants have filed claims for their share money. He esti-
for business until after the presumed mated that those claims represent about 60 percent of the
settlement funds.
statute of limitations on such legal
challenges had run its course. (I can't help but wonder how many merchants received let-
ters informing them they could claim a share of the settle-
ment and threw them in the trash thinking they were junk
mail.)
Corner Post opened for business in 2018 and joined a class-
action lawsuit challenging the Fed-imposed cap in 2021. Court battle looms
The remaining aspects of that lawsuit appeared to be
"Logically, this limitations period makes sense because on the verge of finally being settled in March when the
the business has not been injured by the regulation until parties hammered out a proposed settlement that would
it begins paying the [interchange] fees, but it is significant have lowered interchange by four basis points and put the
because the business likely knew of the damages it was brakes on interchange hikes for four years. It also would've
about to incur upon opening and opened the business eliminated anti-steering rules and simplified rules around
anyway," Matthew Luciani of Global Legal Law Firm ex- dual pricing (surcharging specifically).
plained.
But Chief Justice Margo K. Brodie of the U.S. District Court
"Since it opened, Corner Post has paid hundreds of thou- for the Eastern District of New York torpedoed the plan,
sands of dollars in interchange fees – which has meant asserting that it favored the card brands over merchants,
higher prices for customers," Justice Amy Comer Barrett and didn't treat large and small merchants "equitably" in
wrote in an opinion laying out the court's ruling. "The terms of lower interchange and surcharging rights.
[Fed] Board raises several arguments to support its posi-
tion, but none work," she added. The NRF welcomed the judge's decision, asserting the set-
tlement had "effectively frozen us out" of the negotiations,
Luciani commented "the effect of this decision could be instead working with attorneys for a small group of mer-
sweeping because it could open the hypothetical 'flood- chants. According to court documents, those attorneys
gates' of litigation" not just over interchange, but regarding represented Target, Grubhub, and a handful of smaller
any government regulation. merchants.

The NRF applauded the Supreme Court's ruling. "The Now the case seems headed for trial, although a revised
bottom line is that a small business harmed by a faulty settlement is possible. My guess is that it will end up go-
regulation should not be denied its day in court based on a ing to trial, as the card brands seem ready to dig in and
technicality," said Stephanie Martz, NRF's chief adminis- fight it out.
trative officer and general counsel. That technicality being
when it opened for business. "We continue to believe that the proposed settlement
Never-ending battle over interchange agreement was the appropriate resolution resulting from
lengthy and thoughtful discussions with the merchant
The NRF is one of a handful of groups that has been bat- class," a representative for Visa wrote in an email to The
tling with the card brands and FIs over interchange. It Green Sheet.
helped coin the phrase "swipe fee" rendering interchange
more relatable to the general public. "We believe the settlement presented a fair resolution of
this long-standing dispute, most notably by giving busi-
The federation was also a lead litigant in a class-action ness owners more flexibility in how they manage their
lawsuit, filed in 2005, alleging the card brands colluded card activities," added a Mastercard representative in an
to keep interchange rates high, in effect violating antitrust email.
laws.
Patti Murphy, self-described payments maven of the fourth estate, is
Visa, Mastercard and the banks settled a portion of that senior editor at the Green Sheet. She also co-hosts the Merchant Sales
lawsuit in 2018, resulting in interchange rebates to mer- Podcast, and is president of ProScribes Ink.
chants totaling about $6 billion for interchange paid be-
tween 2004 and 2019. The deadline for claiming a slice of
that money is Aug. 31.

22