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Retailers challenged fees, anti-steering rules

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Unclear whether retailers directly purchased card services

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Other retailers reached $5.6 billion settlement

By Jonathan Stempel

March 11 (Reuters) - A federal judge has rejected

requests from Mastercard ( MA ) and Visa to dismiss litigation by three

groups of retailers that accused the credit card networks of

improperly fixing credit and debit card fees.

In a 64-page decision, U.S. District Judge Margo Brodie in

Brooklyn said the evidence suggested that the retailers were

"direct purchasers" of card acceptance services, giving them

standing to sue.

Brodie also called it an open question whether Mastercard's ( MA )

2006 initial public offering and Visa's 2008 IPO terminated any

pre-IPO conspiracies that may have existed, or whether post-IPO

rules were the result of ongoing conspiracies.

The decision covers parts of nationwide litigation that

began in 2005. It was made public on March 7, after having been

filed under seal on Feb. 22. Various banks that issue cards were

also among the defendants.

Retailers accused Mastercard ( MA ) and Visa of overcharging them

on interchange fees, or swipe fees, when shoppers used credit or

debit cards, and barring them through "anti-steering" rules from

directing customers toward cheaper means of payment.

They also challenged "honor all cards" rules requiring them

to accept all Mastercard ( MA ) and Visa cards if they accept any.

Last March, the federal appeals court in Manhattan upheld a

related $5.6 billion class-action settlement by Mastercard ( MA ) and

Visa that covered about 12 million retailers. Another plaintiff,

7-Eleven, settled in January.

Plaintiffs covered by the latest decision included an

"equitable relief" class that was certified in 2021; "direct

action" plaintiffs including Home Depot ( HD ) and Target; and the

so-called Grubhub plaintiffs, which also opted out of the class.

Mastercard ( MA ) and its lawyers including Gary Carney at Paul,

Weiss, Rifkind, Wharton & Garrison did not immediately respond

to requests for comment.

Visa and its lawyers including Anne Davis at Arnold & Porter

Kaye Scholer did not immediately respond to similar requests.

Steig Olson, a lawyer at Quinn Emanuel Urquhart & Sullivan

representing Home Depot ( HD ), declined to comment.

The equitable relief plaintiffs' lawyers include Robert

Eisler at Grant & Eisenhofer, who did not immediately respond to

requests for comment.

James Wilson at Vorys, Sater, Seymour and Pease represented

the Grubhub plaintiffs and Target, according to court papers,

and also did not immediately respond to requests for comment.

In seeking a dismissal, Mastercard ( MA ) and Visa had cited a 1977

U.S. Supreme Court decision, Illinois Brick Co v Illinois, that

limited standing to direct purchasers from antitrust violators.

But the judge said it was unclear whether the retailers were

direct or indirect purchasers of Mastercard's ( MA ) and Visa's card

services, saying it was reasonable to believe that Mastercard ( MA )

and Visa paid themselves fees out of funds owed to retailers.

"Under defendants' proposed rule, issuers would be the only

potential plaintiffs with standing--yet issuers are among the

defendants in this case," she wrote. "Illinois Brick does not

compel results that are manifestly unreasonable."

She added: "Separate from the dispute about which party pays

the fees, the evidence more importantly tends to show that

merchants directly purchase card-acceptance services."

In a December regulatory filing, Visa estimated it faced $25

billion to $35 billion of potential additional damages from the

nationwide litigation through 2022, if the plaintiffs prevailed

on all claims and defeated any appeals. It noted that any

damages awarded could also be tripled under antitrust law.

In re Payment Card Interchange Fee and Merchant Discount

Antitrust Litigation, U.S. District Court, Eastern District of

New York, No 05-md-01720.

For Mastercard ( MA ): Gary Carney of Paul, Weiss, Rifkind, Wharton

& Garrison

For Visa: Anne Davis of Arnold & Porter Kaye Scholer

For Home Depot ( HD ): Steig Olson of Quinn Emanuel Urquhart &

Sullivan

For Equitable Relief Plaintiffs: Robert Eisler of Grant &

Eisenhofer

For Grubhub plaintiffs and Target: James Wilson of Vorys,

Sater, Seymour and Pease