WASHINGTON — Two recent Supreme Court decisions offered good news to retailers regarding their ongoing fight over the fees they pay on credit and debit card transactions.
Late last month the Supreme Court declined to hear an appeal that sought to reinstate a $7.25 billion antitrust settlement of price-fixing charges against MasterCard Inc. and Visa Inc. Most retailers opposed the settlement. Two days later, the court overturned a lower court ruling in favor of a New York state law that prevented retailers from imposing surcharges on purchases their customers make with credit cards.
A U.S. appellate court in New York had upheld the law in 2015, ruling that it was a legitimate price regulation. But the retail plaintiffs argued that the law, which also banned retailers from telling consumers about the fees they are charged by credit card companies, violated their right to free speech. The Supreme Court justices agreed, and the case has now been sent back to a lower court to be considered on free speech grounds.
“Today’s ruling is a clear stand in favor of the free speech protections of the First Amendment,” National Retail Federation (NRF) senior vice president and general counsel Mallory Duncan said. “While merchants don’t want to surcharge, having the ability to do so would be an important negotiating tool in convincing the card industry to charge reasonable fees instead of continuing to drive up consumer prices through this skyrocketing hidden tax.”
According to NRF, the New York law and similar measures in nine other states were passed at the urging of the credit card industry. NRF also applauded the other ruling, in which the Supreme Court refused to reinstate a class-action lawsuit settlement that would have blocked merchants from accusing Visa and MasterCard of fixing credit card swipe fees.
“If this settlement had been approved, the structure of fees that drive up the prices of everything consumers buy would have been cemented into place forever,” Duncan contended. “Now something can finally be done to bring these fees under control.”
The Supreme Court’s action left in place last year’s ruling by the 2nd U.S. Circuit Court of Appeals that struck down the settlement in a lawsuit brought by a small group of retailers and trade associations claiming to represent the retail industry. The decision leaves the 2005 lawsuit pending in U.S. District Court in New York, where retailers could go to trial, pursue a revised settlement or focus on other lawsuits that have been filed more recently.
The settlement was reached in 2012 even though NRF and others argued that it failed to reform the system under which Visa and MasterCard set swipe fees for credit cards issued by thousands of banks. Rather than lower the fees, the card companies proposed in the settlement that they be passed along to consumers as a surcharge.