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Object, Opt-Out, File a Claim, Do Nothing

Retailers have options relative to the interchange settlement. May 28 deadline approaches.

Most businesses in Minnesota received their 27 page interchange settlement legal briefing in the last 30 days and set it on that special pile in the corner of the desk.

Merchants receiving the notice and/or accepting Visa or Mastercard branded cards between January 1, 2004 and November 28, 2012, are automatically included in the interchange class action case and its related proposed settlement. This settlement is the result of antitrust litigation filed by merchants and merchant representatives against Visa and MasterCard in 2005.

As a part of the interchange settlement merchants need to make a decision about how they react before May 28.  Essentially there are five options:
   - Object to the settlement
   - Opt-out of the settlement
   - Object and opt-out of the settlement
   - File a claim
   - Do nothing

How do merchants determine the right response?

Merchants should think critically about the options. Many MnRA partners (including the National Retail Federation and Retail Industry Leaders Association) and members have already outed-out, objected, or both.

Each merchant needs to decide on its own how to respond to the settlement. You can review the settlement and information related to it at provides a digest of the issue from trade groups opposing the settlement.

What are the concerns with the settlement?

The proposed settlement offers class members money damages estimated to be approximately two or three months' worth of interchange and, among other things, limited modifications to Visa's and MasterCard's surcharging rules, by which, under certain limited circumstances, merchants will be allowed to surcharge customers who pay with Visa or MasterCard credit cards. The settlement offers merchants no meaningful changes to the interchange or "swipe fee" rules that are the centerpiece of the case. Nonetheless, the settlement requires class members to release Visa and MasterCard from liability, FOREVER, for any anti-competitive rules and conduct currently in place (including the interchange or swipe fee rules) and any "substantially similar rules" instituted at any time in the future.

Those that object to the proposed settlement argue that it:
1. Locks in the Visa/MasterCard duopoly;
2. Provides no relief from interchange rate setting or other rules;
3. Includes a mechanism for surcharging consumers to pay for Visa/MasterCard's anti-competitive behavior that is basically unworkable;
4. Denies all current and future merchants their right to bring future legal action related to interchange rules and rate setting, among other things against Visa, MasterCard and the banks; and
5. Could limit emerging innovations that can bring meaningful competition to the marketplace, such as mobile payments.

What can merchants do if they oppose the settlement?

If a merchant independently concludes that the settlement is bad for them and/or for merchants generally, there are three options, each of which has very different meanings and consequences: 1) Object to the entire settlement; 2) Opt-out of the settlement (although you are only permitted to opt-out of the money damages portion of the settlement); or 3) Both object and opt-out.

Any of these choices must be exercised by May 28, 2013.  Regardless of your choice, if the settlement is finally approved in September (subject to any appeals), you will be bound by the terms of the settlement and will be barred from future litigation against Visa and MasterCard (the "release").

What does it mean to object to the settlement?

Objecting to the settlement means telling Judge John Gleeson, the presiding judge in the case, and the proponents of the settlement why you oppose it. Even if you opt-out to preserve your right to seek past damages, you will still be bound by the release and the various purported rules changes (offered in lieu of swipe fee changes). If you do not object, you will have relinquished your only opportunity to make your opposition known to Judge Gleeson and have it noted in the record for appeal. Therefore, if you think the deal is bad overall, you should consider opting-out and objecting (explained below). 

The benefit of objecting is that you (along with other objectors) may persuade Judge Gleeson that the settlement is unfair, thus it should not be finally approved. Further, if you do not object, you will have relinquished your only opportunity to make your opposition known to the court and noted in the record for appeal. Therefore, if you do not accept all of the settlement's terms, you should consider objecting (as well as opting-out).  

We are not aware of significant costs or risks of objecting. It is your right to let Judge Gleeson know how you feel about the settlement.

What does it mean to opt-out of the settlement?

Opting-out means that you exclude yourself from the past damages settlement class and reject the money reward portion of the settlement, which preserves your right to sue Visa and MasterCard for past damages for conduct that occurred before November 27, 2012. Opting-out for past damages in this settlement does not exclude you from the settlement's release or the part of the settlement that purports to change certain Visa and MasterCard rules (although not Visa's or MasterCard's swipe fee-setting practices). You may not opt-out of those portions of the settlement. That is why, if you believe the settlement is bad overall and you want to be able to sue for more damages, you should consider opting-out and objecting to the settlement. 

Opting-out preserves your right to sue for more damages than you would have received if you had not opted-out of the proposed settlement for conduct that occurred before November 27, 2012. Opting-out also sends a clear message to Judge Gleeson that no part of the settlement is acceptable to you.

If you opt-out you will not collect any money damages from the settlement. You will only be able to collect money damages relating to Visa's and MasterCard's rules if you sue Visa and MasterCard on your own or with other merchants and that lawsuit is successful.

What are the benefits of opting out and objecting together?

Opting-out and objecting is the most complete way to express your opposition to the settlement. You will put the most pressure on Judge Gleeson to reject the settlement. You will also get the best protection from any argument that you have accepted the settlement's release terms. And you will be entitled to sue for past damages.

You can object and not opt-out, however, if you do not opt-out you will lose your right to sue independently or as part of a larger group for more damages.

What are the next steps for merchants?

Action is required before May 28, 2013. Once you have made your decision, follow to corresponding link below.
To object and opt-out: Click here to visit to object and opt-out online or via U.S. Mail.

To only object: Click here to download a template to object.

To only opt-out: Click her to download a template to opt-out.

To file a claim: Click here to visit the Payment Card Settlement website to learn about filing a claim.

To do nothing: No action is required. Click here to understand what you are agreeing to by doing nothing.

This digest of this issue and options for merchants is informational and should not be interpreted as legal advice.

Special thanks to the Retail Industry Leaders Association for providing advice and content for this issue update. 

About the Author

Bruce Nustad

Bruce Nustad is president of the Minnesota Retailers Association.

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