1 00:00:00,120 --> 00:00:03,320 Speaker 1: The Supreme Court has refused to rescue a five point 2 00:00:03,400 --> 00:00:07,240 Speaker 1: seven billion dollar antitrust settlement of retailer claims that Visa 3 00:00:07,280 --> 00:00:11,440 Speaker 1: and MasterCard improperly fixed credit card swipe fees. The Justice 4 00:00:11,480 --> 00:00:14,120 Speaker 1: has made no comment in rejecting appeals from the card 5 00:00:14,200 --> 00:00:18,160 Speaker 1: companies and settling retailers, leaving intact or ruling that throughout 6 00:00:18,200 --> 00:00:22,520 Speaker 1: the settlement. Joining us is Bloomberg Intelligence senior litigation analyst 7 00:00:22,680 --> 00:00:26,360 Speaker 1: Jennifer Ree. And we've talked about this case before. These 8 00:00:26,400 --> 00:00:29,880 Speaker 1: swipe fees total more than forty billion dollars at the 9 00:00:29,920 --> 00:00:33,760 Speaker 1: center of this long running legal battle. Refresh our memories 10 00:00:33,800 --> 00:00:36,680 Speaker 1: about the issues. Well, it's sure is long, and I 11 00:00:36,720 --> 00:00:39,280 Speaker 1: think these card companies must feel like it's the litigation 12 00:00:39,320 --> 00:00:41,680 Speaker 1: that's never going to end. Because this all started in 13 00:00:41,680 --> 00:00:44,240 Speaker 1: two thousand five, that's when these lawsuits were first brought. 14 00:00:44,320 --> 00:00:46,640 Speaker 1: So this has really been around a long time. And 15 00:00:46,680 --> 00:00:49,720 Speaker 1: this settlement was reached in two thousand twelve, approved by 16 00:00:49,720 --> 00:00:53,080 Speaker 1: the district court in two thousand thirteen, immediately appealed by 17 00:00:53,120 --> 00:00:55,360 Speaker 1: some merchants that didn't like the settlement. You know, a 18 00:00:55,360 --> 00:00:58,400 Speaker 1: lot of the merchants diverged in their interests here and 19 00:00:58,640 --> 00:01:01,480 Speaker 1: um ended up going to the second circuit and getting 20 00:01:01,480 --> 00:01:04,360 Speaker 1: reversed in two thousand sixteen. So it came back to 21 00:01:04,400 --> 00:01:06,560 Speaker 1: the District court District Court about the middle of two 22 00:01:06,560 --> 00:01:09,120 Speaker 1: thousand and sixteen, and then some merchants as well as 23 00:01:09,200 --> 00:01:12,039 Speaker 1: Visa MasterCard were petitioning for certain at the Supreme Court. 24 00:01:13,440 --> 00:01:16,039 Speaker 1: Gen tell us a little more about the settlement and 25 00:01:16,040 --> 00:01:20,480 Speaker 1: in particular why some of the retailers objected to it. Well, 26 00:01:20,480 --> 00:01:23,080 Speaker 1: you know, the settlement was was kind of a complicated settlement, 27 00:01:23,160 --> 00:01:26,960 Speaker 1: and in the beginning, what the retailers objected to were 28 00:01:27,000 --> 00:01:30,960 Speaker 1: not only what they called super competitive artificially high swipe fees. 29 00:01:31,040 --> 00:01:33,680 Speaker 1: That's the fee that the merchant pays every single time 30 00:01:33,720 --> 00:01:36,120 Speaker 1: somebody uses a credit card, they pay this feed that 31 00:01:36,160 --> 00:01:38,319 Speaker 1: then kind of gets divvied up amongst the banks that 32 00:01:38,360 --> 00:01:41,920 Speaker 1: facilitate that transaction, as well as the card company's Visa 33 00:01:41,920 --> 00:01:44,399 Speaker 1: and MasterCard, and they objected to that fee, but they 34 00:01:44,440 --> 00:01:48,040 Speaker 1: also objected to the membership rules that Visa and MasterCard institute. 35 00:01:48,040 --> 00:01:50,280 Speaker 1: In other words, if you're a merchant going to accept 36 00:01:50,280 --> 00:01:52,000 Speaker 1: our card, you have to accept our rules. And there 37 00:01:52,000 --> 00:01:54,000 Speaker 1: were a bunch of them, and they felt that these 38 00:01:54,080 --> 00:01:58,000 Speaker 1: rules were anti competitive and facilitated the ability to charge 39 00:01:58,040 --> 00:02:00,200 Speaker 1: this high fee. So there were two class as of 40 00:02:00,240 --> 00:02:03,360 Speaker 1: plaintiffs there were, and there were two settlements basically to 41 00:02:03,400 --> 00:02:06,920 Speaker 1: accommodate both. One just wanted cash, want for these high 42 00:02:06,920 --> 00:02:09,639 Speaker 1: fees for many years, but the other really wanted reform. 43 00:02:09,720 --> 00:02:12,320 Speaker 1: They wanted going forward rules changes. We want this to 44 00:02:12,320 --> 00:02:15,520 Speaker 1: be done differently, we want to compete differently. And what 45 00:02:15,639 --> 00:02:18,160 Speaker 1: happened was you had one set of lawyers that negotiated 46 00:02:18,200 --> 00:02:20,959 Speaker 1: the settlement. They got cash, which was started at seven billion, 47 00:02:21,000 --> 00:02:23,720 Speaker 1: went down to five billion because of the many opt outs. 48 00:02:23,720 --> 00:02:26,639 Speaker 1: And then you had some rules changes, but you didn't 49 00:02:26,680 --> 00:02:29,280 Speaker 1: have the change to two of the rules that many 50 00:02:29,360 --> 00:02:33,120 Speaker 1: retailers particularly objected to. You had some lightning up, but 51 00:02:33,160 --> 00:02:36,040 Speaker 1: the biggest problem that some retailers had was that this 52 00:02:36,080 --> 00:02:38,680 Speaker 1: settlement didn't change all the rules, kept a couple of 53 00:02:38,720 --> 00:02:42,639 Speaker 1: rules they didn't like, but were prohibited them anytime in 54 00:02:42,680 --> 00:02:45,200 Speaker 1: the future from suing on the basis of those rules, 55 00:02:45,280 --> 00:02:47,680 Speaker 1: and they didn't like their hands tied that way. So 56 00:02:47,760 --> 00:02:51,560 Speaker 1: what happens from here, Well, now you know, at this point, wow, 57 00:02:51,600 --> 00:02:53,959 Speaker 1: it's back at the district court. It's a new judge. 58 00:02:54,320 --> 00:02:56,520 Speaker 1: So that the judge went back to private practice, who 59 00:02:56,560 --> 00:02:59,240 Speaker 1: knows all about this and handled it. She took over 60 00:02:59,760 --> 00:03:02,560 Speaker 1: um Judge Brody after this settlement had been reached, So 61 00:03:02,600 --> 00:03:05,000 Speaker 1: she really hasn't done much yet. So now it's in 62 00:03:05,040 --> 00:03:07,480 Speaker 1: front of her. You had a lot of the briefing 63 00:03:07,560 --> 00:03:09,800 Speaker 1: was done by the time, you know, even some rejudgment 64 00:03:09,919 --> 00:03:13,640 Speaker 1: motions were done by the time um the original case settled. 65 00:03:13,840 --> 00:03:15,720 Speaker 1: And so now what you have is she's sort of 66 00:03:15,720 --> 00:03:18,240 Speaker 1: pulling things together. There's been a number of status conferences 67 00:03:18,280 --> 00:03:20,800 Speaker 1: to get this going again, and you now have motions 68 00:03:20,840 --> 00:03:23,360 Speaker 1: by these plaintiffs class plaintiffs as well as opt outs 69 00:03:23,480 --> 00:03:25,799 Speaker 1: to bring new amended complaints. They want to add to these, 70 00:03:26,040 --> 00:03:28,400 Speaker 1: they want to bring more now, so you know, I 71 00:03:28,400 --> 00:03:31,359 Speaker 1: imagine it goes forward or the card companies can try 72 00:03:31,360 --> 00:03:35,040 Speaker 1: to reach another settlement. Yeah, what what might another settlement 73 00:03:35,080 --> 00:03:37,920 Speaker 1: look like? It sounds like it's that's at least several 74 00:03:37,960 --> 00:03:42,160 Speaker 1: steps uh down the road. But but you know how 75 00:03:42,280 --> 00:03:46,000 Speaker 1: much how much new leverage do merchants have given that 76 00:03:46,040 --> 00:03:49,440 Speaker 1: the original settlement was thrown out? Well, you know clearly 77 00:03:49,480 --> 00:03:51,560 Speaker 1: they have. The first thing that will happen is it 78 00:03:51,560 --> 00:03:54,400 Speaker 1: will be separate sets of lawyers that will negotiate on 79 00:03:54,440 --> 00:03:57,680 Speaker 1: behalf of different groups of retailers which may have you know, 80 00:03:57,760 --> 00:04:01,480 Speaker 1: incentives or interests that diverge from one another, but certainly 81 00:04:01,520 --> 00:04:05,040 Speaker 1: at this point it's likely to include that cash plus 82 00:04:05,640 --> 00:04:08,520 Speaker 1: because you now have more time that they can allege 83 00:04:08,560 --> 00:04:11,440 Speaker 1: in which these higher fees were charged, and and there's 84 00:04:11,480 --> 00:04:13,840 Speaker 1: going to be a group of retailers that are going 85 00:04:13,920 --> 00:04:16,720 Speaker 1: to want um some of these rules change that MasterCard 86 00:04:16,760 --> 00:04:19,359 Speaker 1: and Visa you know, have really clung to over the years. 87 00:04:20,200 --> 00:04:22,719 Speaker 1: That was what I was interested in. Is there a 88 00:04:22,760 --> 00:04:25,960 Speaker 1: way outside of the courts that this is going on 89 00:04:26,160 --> 00:04:30,760 Speaker 1: with industry groups? Well, there are industry trade groups you 90 00:04:30,760 --> 00:04:32,880 Speaker 1: know that are involved in this, that have been involved 91 00:04:32,880 --> 00:04:36,919 Speaker 1: since the very beginning, particularly groups that represent retail associations, 92 00:04:37,120 --> 00:04:39,240 Speaker 1: and you know, they all have a different idea about 93 00:04:39,279 --> 00:04:41,600 Speaker 1: what they want here. But I think primarily it's the 94 00:04:41,680 --> 00:04:45,039 Speaker 1: really big retailers that have huge transaction volume. They want 95 00:04:45,080 --> 00:04:47,599 Speaker 1: some ability to negotiate to use that leverage they have 96 00:04:47,720 --> 00:04:50,479 Speaker 1: because they have this huge transaction volume to negotiate with 97 00:04:50,520 --> 00:04:53,039 Speaker 1: these companies or these issuing banks on their own, uh, 98 00:04:53,200 --> 00:04:57,080 Speaker 1: negotiate their own rules, negotiate their own rates, and MasterCard 99 00:04:57,120 --> 00:05:01,080 Speaker 1: and Visa thinks that would be chaos. I think they 100 00:05:01,080 --> 00:05:03,480 Speaker 1: think it would be chaos. I think they think a 101 00:05:03,520 --> 00:05:05,560 Speaker 1: lot of the benefits that they bring to card holders, 102 00:05:05,560 --> 00:05:08,200 Speaker 1: that card holders enjoy, uh, that they might not be 103 00:05:08,240 --> 00:05:11,360 Speaker 1: able to bring anymore. Uh Yeah, many many issues they 104 00:05:11,400 --> 00:05:14,560 Speaker 1: have with it. And we will discuss be discussing this 105 00:05:15,000 --> 00:05:17,800 Speaker 1: many many years into the future, I think, I think 106 00:05:17,839 --> 00:05:21,000 Speaker 1: we will. I suspect that's not just Jenny, not just 107 00:05:21,080 --> 00:05:23,360 Speaker 1: the card companies who think that this litigation is going 108 00:05:23,360 --> 00:05:28,880 Speaker 1: on forever. Bloomberg Intelligence analysts like Jennifer Reed. Jen loves antitrust. 109 00:05:29,000 --> 00:05:32,480 Speaker 1: There's and there's nothing she likes better. So so true too. 110 00:05:32,680 --> 00:05:36,480 Speaker 1: So this is just wonderful for us to have you 111 00:05:36,600 --> 00:05:39,320 Speaker 1: here to tell us all the time all about these cases. 112 00:05:39,600 --> 00:05:44,080 Speaker 1: And that's Bloomberg Intelligence and your litigation analyst, Jennifer Ree. 113 00:05:44,120 --> 00:05:47,480 Speaker 1: And if you want to follow more of Jen's coverage 114 00:05:47,560 --> 00:05:50,120 Speaker 1: of litigation, you can go to b I go on 115 00:05:50,200 --> 00:05:51,360 Speaker 1: the Bloomberg terminal.