Anti-Trust Settlement Thrown Out
For those of us in the financial industry, three things are certain: Death, taxes and merchant antitrust litigation.
Yesterday, the Court of Appeals for the Second Circuit threw out the $7.5 billion 2012 settlement between merchants and Visa and MasterCard intended to put an end to a decade of antitrust litigation and brihttps://fred.stlouisfed.orgng about peace in our time. Considering how long it dragged on and that the settlement was the largest antitrust payout in history, perhaps it is only fitting that the decision came down the day before the 100th Anniversary of the Battle of the Somme, the bloodiest battle in World War I that resulted in over a million deaths and casualties.
What happens now? The case goes back to the trial court and merchants are likely to push for even more money and a narrower ban on future litigation. The National Association of Convenience Stores cheered the court’s decision to scuttle the settlement because “the relief it offered was inadequate and the release [from future litigation] was overbroad.” The National Retail Federation predicted that the Card firms could face even more pressure from retailers to change their fee structures.
Among the defects cited by the court was that there were too many competing merchant interests represented by the same attorneys. The court explained that “Unitary representation of separate classes that claim distinct, competing, and conflicting relief create unacceptable incentives for counsel to trade benefits to one class for benefits to the other in order somehow to reach a settlement.” The court was also concerned that the settlement barred all future claims against Visa and MasterCard but only placed temporary restrictions on the card companies.
The merchants were divided into two classes: one class consisting of merchants that accepted Visa and/or MasterCard from January 1, 2004 to November 28, 2012, which was eligible to receive part of the $7.25 billion; the other consisting of merchants who joined the networks after that late, who were only entitled to injunctive relief in the form of changes to Visa’s and MasterCard’s network rules. For example, Visa and MasterCard agreed to change their network rule to allow merchants to surcharge credit card purchases. But the court noted that in States such as New York surcharge bans are still illegal under state law.
This chart highlights what’s happened to the yield on 10-year Treasuries in the aftermath of the decision of Great Britain to leave the Eurozone.(Tap it for a better view). Needless to say, with yields tumbling, it’s hard to see why the Feds would want to raise interest rates any time soon.
On the bright side, this continues to be the Golden Age to buy a home, assuming you can qualify for a mortgage.
By the way, I made this chart after visiting the Fred Website, a phenomenal resource of which all you number junkies out there should be aware. On that note, have a nice Fourth!