It’s 1, 2, 3 Swipes, You’re Out!

February 12, 2014

It’s mid-February 2014. The Mid-Atlantic, homebase to Host Merchant Services, has been mired in a series of snowstorms that makes the jaunty tune of “Take Me Out To The Ballgame” seem months and months away. Yet today, February 12, is the day pitchers and catchers report for Philadelphia Phillies Spring Training 2014. Six days ago the first players of the season reported for the Arizona Diamonbacks. And 4 days from now, they will report for the Minnesota Twins.

Which means we’re closing in on a new season of baseball. More strike outs, more ground outs, more pop outs and even more home runs. A whole new season of visiting the ballpark and craving a hot dog. Or an ice cream sundae in a batting helmet cup. Or a brand new plastic batting helmet hat and foam finger combo to display your rabid fandom. All purchases you can make with plastic and one herculean, Casey-At-The-Bat swipe of said plastic right there at the ballpark.

But one of those major league baseball teams will be visiting the mound and facing a decision on how to proceed with the biggest ongoing lawsuit in the payment processing industry. The Minnesota Twins, according to the Star Tribune, enter the credit card swipe fee dispute after opting out of a class-action deal. The baseball team hopes to do better on its own than in a class-action settlement over credit card transaction fees.

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What’s on Second? 

The Twins are the latest business to sue MasterCard and Visa — the two dominant credit card networks — accusing them of breaking antitrust laws by fixing bloated fees that retailers have to pay to accept their customers’ credit cards. The antitrust case against Visa, MasterCard and several issuing banks stemmed from a dispute relating to the percentage of credit card transaction fees that retailers must remit to the credit card processing network. The fees generally range from 1.5-3 percent and are shared with the bank that issued the card.

The lawsuit settled in 2012 for a record $7.25 billion, with a federal judge ultimately approving $5.7 billion after thousands of dissatisfied retailers opted out of the damages portion of the deal. There were 139 parties involved as plaintiffs, and the case was active for over eight years. In July 2012, a settlement was reached that provided $6 billion in damages to affected retailers and another $1.2 billion for a temporary reduction in interchange fees. As a further concession, Visa and MasterCard eliminated certain rules for merchant services that prohibited surcharging, which is a practice that allows retailers to recoup credit card costs by passing them on to the consumer.

Arguing with the Ump

Almost immediately, opposition to the swipe fee settlement began to emerge. The primary objections centered on the belief that the agreement does not provide any meaningful reforms to the current model. Many merchants believe that market forces will not allow for credit card surcharges since consumers will object to the added fees. Other retailers oppose the stipulation in the agreement that prohibits future swipe fee lawsuits.

As a result, major retailers such as Target, Nike, Home Depot, Lowes, Starbucks and Best Buy ultimately opted out of the settlement. Major trade organizations, including the National Restaurant Association (NRA), have voiced significant opposition to the agreement. In fact, the NRA strongly encouraged its constituent members to reject the settlement and highlighted the potential negative impact it could have on the emerging mobile payments market.

Batting Clean Up

The Twins are part of a local group of Minneapolis opt-outs that includes Granite City Food & Brewery and JB Hudson Jewelers; they all filed their own lawsuit Feb. 7 in U.S. District Court in Brooklyn. The complaint doesn’t say how much the companies think they are owed.

Speaking to the Star Tribune, Twins spokesman Kevin Smith characterized the lawsuit as something of a technicality “to protect our interests.”

“Once we opted out, the legal system pushed the burden on us to move forward with obtaining a fair result,” Smith told the paper. “We’ll see what happens.”

Vincent Esades, the Minneapolis antitrust lawyer representing the group, told the Star Tribune the Twins are basically making the same case against Visa Inc. and MasterCard Inc. as the original antitrust class lawsuit. He estimated that “hundreds” of such cases have been filed in the wake of the settlement, but said he feels confident the group will get more in damages on their own than they would as part of the settlement.

Around the Horn

To review the full extent of this ongoing saga, you can read our previous coverage of this settlement:

 

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