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National Restaurant Association - Suit settlement won't fix broken swipe-fee system

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Suit settlement won't fix broken swipe-fee system

A proposed settlement in the swipe-fee antitrust suit will not solve the fundamental problems of "price fixing and policing actions" by big banks and credit card companies, the National Restaurant Association said Monday.

Scott DeFife, the NRA's executive vice president of policy and government affairs, said the proposed settlement between merchants, Visa, MasterCard and some of the nation's largest banks would not fix the fundamental problems of price fixing and control by the card companies.

DeFife also said that because of the way swipe-fees are regulated now, the card companies and big banks have been able to increase fees for merchants well beyond what's reasonable. A settlement of the suit would not reverse the negative effects the regulations have had on small businesses, such as restaurant operators, he noted.

"A settlement needs to improve the situation, not make it worse," he said. "Cementing in stone the bad actions of Visa and MasterCard and ignoring the real problems virtually guarantees a need for legislative action."

The proposed settlement would limit merchants' choices among networks, keep pricing hidden and allow the card companies to police customer communications, he added.

"Since the lawsuit began seven years ago, Visa and MasterCard have raised interchange rates twice a year every year on average, and nothing in the proposed settlement would protect the small businesses we represent from these year-over-year increases going forward," DeFife argued.

While a majority of class plaintiffs, including the NRA, oppose the settlement, the "class counsel" asked the federal court for the Eastern District of New York on Oct. 19 to preliminarily approve the agreement. Opponents have 30 days to file a brief opposing preliminary approval.

"The defendants want to make surcharging the remedy to all the antitrust problems with swipe fees, but we and the other named class plaintiffs didn't ask for that," DeFife said. "Counsel relies on it because it was what Visa and MasterCard would agree to, not because it would be good for merchants or consumers."

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