By Andrew R. Johnson
A U.S. appeals court on Monday denied a request by Home Depot
Inc. (HD) and other merchants to expedite the appeals process in an
ongoing battle over a class-action settlement potentially worth
$7.25 billion with Visa Inc. (V), MasterCard Inc. (MA) and several
large banks.
The Second Circuit Court of Appeals said it was deferring
briefing for an appeal of the settlement until the deal receives
final approval from the U.S. District Court in Brooklyn, where the
litigation is currently pending. A ruling on final approval is
expected next year.
A spokesman for Home Depot said in a statement Monday that the
settlement is a bad deal for consumers and merchants.
"It offers little change to the anticompetitive practices of
Visa and MasterCard, while it grants virtual immunity from future
antitrust challenges for these financial-services companies and
their banking partners," the spokesman said. "With that in mind, we
have filed our objections with the court and continue to weigh our
options with regard to the settlement."
Monday's decision is the latest development in a legal battle
between some of the country's largest merchants and credit-card
companies over fees retailers pay each time a customer pays with a
card, known as interchange or swipe fees.
The litigation, filed in 2005, alleged Visa and MasterCard
conspired with large banks that issue credit cards, including Bank
of America Corp. (BAC) and J.P. Morgan Chase & Co. (JPM), to
set the fees at arbitrarily high levels. Visa and MasterCard set
the fees, which are collected by the banks as revenue.
The companies reached a settlement in July that would result in
payments totaling $6.05 billion going to a class that could include
up to eight million merchants as well as a temporary reduction in
the fees worth $1.2 billion. Visa and MasterCard have also agreed
to change rules that merchants have long argued are unfair,
including a ban against surcharging customers who pay with credit
cards.
The rule changes are set to take effect in January as a result
of receiving preliminary approval in November by U.S. District
Court Judge John Gleeson. Large retailers, including Home Depot,
Wal-Mart Stores Inc. (WMT), Target Corp. (TGT) and several trade
groups, including the National Retail Federation, have lobbied
against the settlement, though, arguing it grants overly broad
releases from future litigation to Visa and MasterCard and will do
little to stop swipe fees from increasing in the future.
Last month, some plaintiffs who have since objected to the deal,
including the National Association of Convenience Stores and
National Grocers Association, and retailers like Home Depot, which
is not a named plaintiff in the case, filed notices of appeal of
preliminary approval.
"While we are disappointed with the ruling, we are very
confident in our position and will be prepared to show at the final
approval hearing that the settlement both violates due process and
is plainly inadequate as a solution to the market failures that
plague this industry," said Jeff Shinder, a managing partner with
Constantine Cannon LLP, which is representing several of the named
plaintiffs who object to the deal and joined in Home Depot's
request for an expedited appeals process.
The decision to deny the request was included in a letter filed
in district court Monday by attorneys representing the class of
merchants.
Proponents of the deal say the settlement will help merchants
better control their costs of accepting credit cards and have
argued that critics are trying to mount a smear campaign to drum up
support for legislation that would permanently lower credit-card
swipe fees.
Rules that cut in half debit-card swipe fees took effect in
October 2011 per a provision of 2010's Dodd-Frank Act, though they
did not affect credit-card fees.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires