I’d like to thank Concurring Opinions for inviting me to blog about In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. This eight-year-old multi-district litigation has produced the largest proposed cash settlement in litigation history ($7.25 billion) along with what is perhaps the most extraordinary release from liability ever concocted. It may also be the most contentious. Over half the name plaintiffs and over 25% of the class, including most large merchants (think Walmart, Target) and most merchant organizations, have objected. On September 12, Eastern District of New York Judge John Gleesaon held a fairness hearing to consider the settlement, and the parties are awaiting his decision. An appeal is a virtual certainty.
This post will provide background on the credit card industry pricing mechanisms that led to this litigation, the legal issues in the case, and the structure of the settlement. (You can read more about the history of the credit card industry’s relationship to the antitrust laws here.) In subsequent posts, I’ll separately analyze the damages and relief provisions in the settlement. (If you can’t wait my working paper analyzing the settlement is here.) If there are particular issues that you’d like to read more about, let me know in the comments and I will respond in subsequent posts.
The credit card industry is atypical, but not unique, in that it competes in a two-sided market, i.e., one that serves two distinct customer bases. A card system like Visa provides both a purchasing device (credit cards) to consumers and a payment acceptance service to merchants. (By way of comparison, the legal blogging market is also two-sided. Concurring Opinions provides both an information forum to its readers and a platform to its advertisers.)