Wal-Mart Stores Inc., Costco Wholesale Corp. and Starbucks are among 19 major retailers who said they are opting out of a multi-billion dollar class-action settlement with Visa Inc. and Mastercard Inc. over their transaction processing fees.



The proposed settlement stems from lawsuits challenging the interchange practices of Visa and MasterCard and is pending before the U.S. District Court, Eastern District of New York. The 19 retailers said the settlement wont keep credit card swipe fees from rising and dont want to give up the right to bring legal action in the future should credit card networks behave in an anti-competitive manner.

 

The announcements comes as retailers push to create their own mobile payment system that could greatly reduce the pricing power of credit card and other payment processing companies. Wal-Mart, Target, 7-Eleven Inc., Southwest Airlines, Sunoco Inc., Publix Super Markets Inc. and dozens of other national retailers formed the Merchant Customer Exchange, or MCX, in 2012 to develop a mobile commerce platform that would bypass existing payment processing networks.

 

The Retail Industry Leaders Association, which represents Americas largest retail companies, announced in April that it will opt out and object to the proposed swipe fee class action settlement with Visa and MasterCard.

 

 

By opting-out and objecting RILA not only registered its opposition to the terms of the deal, but rejected the financial reward available to it under the terms of the proposed settlement.

 

 

Merchants argue that the proposed settlement fails to address the anticompetitive practices that were the genesis for the lawsuits and denies merchants their right to challenge these practices ever again in court. Specifically RILA believes that the proposed settlement is unacceptable because it:

 


  • Locks in the Visa/MasterCard duopoly,

  • Provides no relief from interchange rate setting or other rules,

  • Denies all current and future retailers their right to bring future legal action related to interchange rules and rate setting, among other things against Visa, MasterCard and the banks, and

  • Could limit emerging innovations that can bring meaningful competition to the marketplace, such as mobile payments.

In November 2012, RILA joined a majority of named class plaintiffs and nearly 1,200 others urging the court to deny preliminary approval to a proposed settlement.


Each member of the merchant class, which includes estimated 8 million merchants, has until May 28 to weigh in with the court in advance of a September 12 hearing in federal district court.